Research background: The relationship between financial development and economic growth has been attracting attention in the field of economics since the times of the “great moderation”. Previous empirical studies still fail to put forward a general conclusion on whether and how financial development affects economic growth. This is particularly true due to the lack of empirical research on the matter in question for countries in transition. Purpose of the article: This study aims to contribute to bridging the gap in the financial development-growth nexus in transitional economies. Understanding the mechanism behind financial development and economic growth should assist policymakers in the design of efficient economic policies or avoiding/alleviating financial cycles. Methods: Using Granger causality test in frequency domain, which shows to have more power over standard time domain Granger causality test, as well as gross domestic product (GDP) and the monetary base (M2 — intermediate money), we investigated the finance-growth relationship in 19 Central, East, and Southeast European countries (CESEE) from 1991 to 2017. Findings & Value added: Study results show that financial development is important for growth in CESEE countries, thus supporting the “supply-leading” theories in general for countries in the sample. Our findings indicate that the relationship between financial development and economic growth exists in CESEE countries (with one exception — the Czech Republic) ranging from unidirectional (Albania, Bosnia and Hercegovina, Belarus, Estonia, Macedonia, Russia, Turkey), to bi-directional spectral Granger causality (Bulgaria, Croatia, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovenia, Slovakia, Ukraine).
Research background: Financial cycles are behind many deep financial crises and it closely connects them with the business cycles, showing long memory properties and effects. Being closely connected with the business cycles, we must first explore the true nature of the financial cycles to understand the nature of the business cycles. Financial cycles are real, they have long memory properties and long-lasting effects on the economy. Purpose of the article: This study investigates the use of (SSA) in tracking and monitoring financial cycles focusing on ten (10) transitional economies 2005–2018. Methods: Singular spectrum analysis isolate significant oscillatory patterns (cycles) on housing markets with an average 4-years length. We isolate credit cycles just for Bulgaria, implying long memory properties of the cycles since this study investigated medium term (2–5 years) oscillations. Findings & Value added: The results prove the importance and advantages of using (SSA) in the study of financial cycles attempting to reveal the true nature of financial cycles as the principal component behind business cycles. Financial cycles show longer oscillations in the credit and property price series, which can explain 37.7%–49.9% of the variance of the total financial cycle fluctuations. Study results are of practical importance, particularly to policy-makers and practitioners in former transitional economies being vulnerable to adverse shocks on the financial markets. The results should assist policy-makers and financial practitioners in building and maintaining a sound financial policy needed to avoid future financial “bubbles”.
The aim of the paper is to study finance-economic growth nexus in Poland using a time series approach. We find evidence of the existence of the finance-economic growth link in Poland. Most empirical studies do not consider the lending structure of the financial sector (share of households’ vs firms in total credits). The obtained results show that when using the share of households and companies in total credits, the long run empirical relationship in VECM is statistically significant and larger. Empirical studies using total private credit share in the GDP or the value/volume of total credits tend to undervalue the impact of financial development on economic growth. In the case of Poland, empirical evidence that supports this hypothesis was found, and therefore policymakers and researchers should take bank lending structure into account. Furthermore, the study shows that financial series may possibly have long memory properties and that researching the financial development-growth nexus could require using fractional integration methods. The reported evidence suggests financial development plays a significant role in both economic growth and credit growth. Due to data limitation, this study focuses on a single country case – Poland with the need for further research (larger sample).
Financial cycles have sizeable economic effects, as witnessed during the 2008 financial crisis. However, despite the topic’s research importance, there is limited literature on how financial cycles and financial crises affect individual family firms. To the best of our knowledge, our study is among the first to measure the impact of financial cycles and crises on family firms. To study the impact of financial cycles on family firms, we use the Amadeus database on European companies. We identify family firms following the Global Family Business Index methodology 2019 (EY and the Center for Family Business of the University of St. Gallen). To measure the impact of financial cycles, we use the credit-to-GDP gap indicator from the Bank for International Settlements. Using the credit-to-GDP gap as a proxy for financial cycles, we use panel structural vector autoregression (Abrigo and Love 2016 ), Wald tests of Granger causality (Granger 1969 ), and impulse response functions (Lütkepohl 2010 ; Lütkepohl et al. 2015 ). We prove that family firms are less vulnerable than non-family firms to financial cycles during both financial booms and busts. Family firms perform better when financial cycle shocks have a less pronounced impact on firms’ performance. Non-family firms are highly vulnerable to financial cycles, performing worse during both booms and busts. The adoption of family firm management and governance policies should improve non-family firms’ performance and help the economy recover rapidly in times of crisis (exogenous shocks). Our study is the first to explore the impact of financial cycles on the micro level with a focus on family firms. The results could help managers and practitioners better form their business policy by looking at family firms’ experiences. Targeting economic policy more towards family firms in good and bad times will allow policymakers to prepare for future economic crises.
This work explores the relationship between financial cycles in the economy and in economic research. To this aim, we take China as an empirical example, and an intuitive bibliometric analysis of selected terms concerning financial cycles in economic research is performed first. Both in the economy and in economic research, we then conduct singular spectrum analysis to further isolate and describe the specific length and amplitude of financial cycles for China based on quarterly time-series data. Finally, according to the estimated cycles that detrended by Hodrick-Prescott filter for financial and bibliometric variables, the Granger causality test scrutinizes the results of the first two steps. Moreover, a time-varying parameter vector autoregression model is estimated to quantitatively investigate the time-varying interaction between financial and bibliometric variables. Our study shows that financial cycles have a strong effect on the developments in the financial-related literature. In particular, the 2008 global financial crisis’s impulse intensity is significantly higher than in other periods. Surprisingly, discussions on financial cycles in the literature also have an impact on financial activities in real life. These findings contribute to nascent work on the patterns in financial cycles, thus providing a new and effective insight on the interpretation of financial activities.
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