Financial Development and Economic Activity in Advanced and Developing Open Economies: Evidence from Panel Cointegration

Chortareas, Georgios; Magkonis, Georgios; Moschos, Demetrios; Panagiotidis, Theodore

doi:10.1111/rode.12132

Cited by 39 publications

(30 citation statements)

References 73 publications

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“…OMI positively correlates with EPI as well (Figure 1b), overall suggesting that economic development positively affects environmental performance. This is confirmed by relative literature suggesting that the openness of an economy plays an important role in developed counties [33] through raising foreign direct investments and liberalizing the financial and capital markets, and an open economy seems to assist countries with the reduction of CO 2 per capita [34]. Frankel and Rose [35] illustrate that the effects of trade and growth on air pollution (e.g., SO 2 and NO 2 ) is good enough, while the openness of the economy and CO 2 emissions do not have a good relationship.…”

Section: Resultssupporting

confidence: 74%

Open Economy, Institutional Quality, and Environmental Performance: A Macroeconomic Approach

2016

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Abstract:As the subject of how economic development affects the quality of the natural environment has gained great momentum, this paper focuses on examining the extent to which the openness of a market economy and the quality of the institution affect environmental performance. The majority of the current studies focus on the Environmental Kuznets Curve and the level of economic growth. This paper addresses this question by relating environmental ("Environmental Performance Index") to macroeconomic (Gross Domestic Product per capita, "Open Markets Index") and governance indicators ("Worldwide Governance Indicators"). The sample consists of 75 countries, including all G20 and EU members, comprising "more than 90% of global trade and investment". Findings show that the Environmental Performance Index is positively correlated to each of the (institutional) indicators, so as to confirm that the selected indices are consistent with previous studies, suggesting that environmental performance increases in line with economic development and that good governance increases a country's levels of environmental protection. By applying factor analysis, an empirical model of the Environmental Performance Index is estimated, suggesting that there is a significant positive correlation between a country's economic growth, the openness of an economy, high levels of effective governance, and its environmental performance.

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Section: Resultssupporting

confidence: 74%

Open Economy, Institutional Quality, and Environmental Performance: A Macroeconomic Approach

2016

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“…These results confirm the findings of existing macroeconomic studies that generally suggest a positive role of FDI in economic growth, especially when the country has a highly educated workforce that allows it to exploit FDI spill-overs [76,77]. We do not confirm the role of country's openness to trade in developing countries (as [32]). This may be explained by extensive foreign trade, even during the times of communism in the CESEE region and the "specialisation" of those countries in certain goods, services or commodities.…”

Section: Baseline Resultssupporting

confidence: 70%

“…The empirical literature supports negative effects of inflation-a measure of monetary discipline-and government expenditure-a measure of government burden-on economic growth; instead, trade and investment openness are expected to be positively correlated with growth. On the one hand, by facilitating the exchange of goods and services, trade openness can foster economic growth (see, e.g., [32]); on the other hand, FDI inflows are expected to produce positive externalities in the form of technology transfer and spill-overs.…”

Section: Measures Of Macroeconomic Environmentsmentioning

confidence: 99%

“…The study concluded, that in order to achieve a long-run positive finance and growth relationship, as established by [19], those countries needed to increase domestic credit to the private sector and domestic savings to attract a higher level of investments. A recent study used a panel co-integration approach to analyse the role of financial deepening in economic growth over the period from 1970 to 2007 for 20 developed and 17 emerging countries in Africa, Asia and Latin America [32]. Unfortunately, CESEE countries were not included in the sample since the use of such a long time horizon is not possible for these countries.…”

Section: Literature Reviewmentioning

confidence: 99%

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Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

et al. 2017

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This study focuses on the role of financial development in the economic growth of Central, Eastern and South-Eastern European (CESEE) countries in the post-communist era (1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014), which coincides with the opening up of financial markets to foreign investors and the global financial crisis. We investigate whether economic growth in CESEE countries has benefited from the presence of foreign-owned banks. To this end, we introduce some refined measures of financial development and control for banks' financial strength. Our results challenge the idea that bank credit fosters economic growth and that foreign-owned banks are indisputably a positive addition to local markets able to foster economic growth.

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“…Expansion to overseas markets is essential for construction firms' survival because of the limitations of the domestic construction market. Actually, previous research mentioned that even if there is not profit directly, it is important to secure business opportunities consistently [44]. Accordingly, multinational diversification of Korean construction firms through expansion of the overseas construction market could be considered a rational decision.…”

Section: Discussionmentioning

confidence: 99%

The Impact of Multinational Business Diversification on the Financial Sustainability of Construction Firms in Korea

2016

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This study investigated empirically whether multinational business diversification by Korean construction firms contributes to their financial sustainability using the vector error correction model. In this study, the current ratio and the debt ratio were used as proxy variables for financial sustainability. International construction orders and domestic construction orders were used as proxy variables for multinational business diversification for the analysis. Of the models used for analysis in this study, Model A used the current ratio and international and domestic construction orders, and Model B used the debt ratio and international and domestic construction orders. The time-series data utilized consisted of the quarterly data from Q1 of 2001 to Q4 of 2015. The results of the analysis imply that an increase in international construction orders undermines the financial viability of construction firms because of a decrease in the current ratio and an increase in the debt ratio. The results also show that the scrutinized analysis of profitability was insufficient because overseas project orders were not pursued based on a long-term business strategy but on short-term turnover. Therefore, Korean construction firms should recognize the overseas construction market as an independent market, not an alternative to the domestic market, and establish a long-term business strategy to enter overseas markets effectively to secure financial sustainability.

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Financial Development and Economic Activity in Advanced and Developing Open Economies: Evidence from Panel Cointegration

Cited by 39 publications

References 73 publications

Open Economy, Institutional Quality, and Environmental Performance: A Macroeconomic Approach

Open Economy, Institutional Quality, and Environmental Performance: A Macroeconomic Approach

Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

The Impact of Multinational Business Diversification on the Financial Sustainability of Construction Firms in Korea

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