Mak B. Arvin

The dynamics of banking sector and stock market maturity and the performance of Asian economies : Time series evidence

Purpose - – The purpose of this paper is to examine the nature of causal relations between banking sector maturity, stock market maturity, and four aspects of performance and operation of the economy: economic growth, inflation, openness in trade, and the degree of government involvement in the economy. Design/methodology/approach - – The authors look for possible links between the variables by conducting panel cointegration and causality tests, using a large sample of Asian countries over the period 1960-2011. Novel panel data estimation methods allow for robust estimates, using both variation between countries and variation over time. Findings - – The study identifies interesting causal links among the variables deriving uniquely from our innovations. In particular, The paper finds that for all regions considered, banking sector maturity and stock market maturity are causally linked, sometimes in both directions. Furthermore, stock market maturity may lead to economic growth, both directly and indirectly through indicators such as inflation and trade openness. The findings also support the notion that economic growth affects the maturity of the stock market in most regions. Practical implications - – The results lend support to the notion that a mature financial sector is a key contributor to generating economic growth. Furthermore, economic growth itself has the potential to bring about maturity in the financial sector. Originality/value - – The paper uses sophisticated principal-component analysis, panel cointegration, and Granger causality tests, methods not used in this literature before. The method was applied to recent data pertaining to 35 Asian countries – a group of countries that has previously not been adopted in this literature.

Does banking sector development affect economic growth and inflation? A panel cointegration and causality approach

Many studies investigate relationships between economic growth in specific economies and the development of its banking sector or between its growth rate and its rate of inflation. Advancing on earlier work, this article uses panel cointegration and causality tests applied to 34 OECD countries over the period 1960–2011. Our novel panel-data estimation procedure offers more robust estimates by utilizing variations between countries as well as variation over time. We identify important long-run causal links among the variables and show their implications for economic policy.

Innovation, financial development and economic growth in Eurozone countries

ABSTRACT Using a panel vector auto-regressive model, we study interactions between innovation, financial development and economic growth in 18 Eurozone countries between 1961 and 2013. We focus on whether causality runs between these variables both ways, one way, the other way or not at all. Our empirical results show that development of the financial sector and enhanced innovative capacity in the Eurozone contributes to long-term economic growth in the countries in the region.

Are there country size and middle‐income biases in the provision of EC multilateral foreign aid?

This article investigates whether the European Community (EC) multilateral aid allocation process is characterised by certain biases. Using EC multilateral aid to 87 developing countries over the ten-year period 1986–95, we find evidence that EC aid favours smaller countries as well as those covered under the Lome Convention. In addition, we find some support for the notion that EC aid discriminates in favour of richer developing countries. The study concludes, therefore, that the ECs multilateral aid distribution is highly politicised.

An empirical investigation of pension funding levels in Canada

In the literature, three non-mutually exclusive approaches explain pension plan funding decisions: the traditional view (Friedman, 1983), the corporate view (Bodie et al., 1985) and the bonding view (Ippolito, 1985). An investigation of pension funding levels is presented here relying on an empirical model integrating these three different views. The results, based on data covering 115 relatively large Canadian firms in 1990, offer strong support for the bonding view.

Trade openness, foreign direct investment, and finance-growth nexus in the Eurozone countries

ABSTRACT The paper investigates causal relationships between trade openness, foreign direct investment, financial development, and economic growth in 19 Eurozone countries over the period 1988–2013. Using a panel vector error-correction model (VECM), the empirical results show that these variables are cointegrated. The study shows that a combination of opening the Eurozone countries for trade and fostering their financial and economic development have elevated inflows of foreign direct investment into the region in the long run. At the same time, increasing inflows of foreign direct investment in the short run have propelled economic growth, which in return has strengthened the role of financial development and international trade to sustain economic growth in the region through feedback effects. The empirical results have important policy implications for countries in the Eurozone, especially those who face challenges as a result of lack of confidence in their financial system and those who face a sovereign debt crisis.

Telecommunications Infrastructure and Economic Growth: Comparative Policy Analysis for the G-20 Developed and Developing Countries

Abstract This paper examines the nexus between the development of telecommunications infrastructure (DTI), economic growth, and four key indicators of the operations of advanced economies. It employs a panel vector auto-regressive model to detect causality and examine long-run relationships between variables in the G-20 countries for the period 2001–2012. Evidence is found that DTI, measured through six indicators, may cause economic growth and that causation may be bidirectional. Not surprisingly, the exact nature of causality depends on the group of countries considered and on the definition of DTI.

Telecommunications infrastructure and usage and the FDI–growth nexus: evidence from Asian-21 countries

ABSTRACT This paper examines causal relationships between telecommunications infrastructure and usage (TEL), foreign direct investment (FDI), and economic growth in the Asian-21 countries for the period 1965–2012. TEL is defined in terms of the prevalence of telephone main lines, mobile phones, internet servers and users, as well as the extent of fixed broadband. These measures are considered both individually and collectively in the form of a composite index of TEL. We report results on long-run relationships between TEL, FDI, and economic growth. We also use a panel vector auto-regression model to reveal the nature of Granger causality among the three variables. Results from these causal relationships provide important policy implications to the Asian-21 countries.

Financial depth, internet penetration rates and economic growth: country-panel evidence

ABSTRACT The article investigates causal relationships between internet penetration rates, financial depth and per capita economic growth in the Next-11 countries. Using panel vector autoregressive (VAR) approaches, our empirical results show that these variables are cointegrated. Moreover, we find bidirectional causality between internet penetration rates and economic growth, and between financial depth and economic growth in the short run.

Relationships between telecommunications infrastructure, capital formation, and economic growth

This paper examines mutual relationships between telecommunications infrastructure, gross capital formation, and economic growth in the G-20 countries between 1961 and 2012. The countries are assessed individually, as a group of developing and developed countries within two sub-groups, and as a whole. Our results demonstrate that there is a long-run equilibrium relationship between these three variables. We arrive at this conclusion for the two sub-groups, for the G-20 as a whole, as well as for all individual countries. We then use a panel vector auto-regression model to reveal the nature of Granger causality among the three variables. As expected, the results are not uniform and are country and sample dependent.