Openness and the finance-growth nexus

Herwartz, Helmut; Walle, Yabibal M.

doi:10.1016/j.jbankfin.2014.06.031

Cited by 45 publications

(28 citation statements)

References 43 publications

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“…Models 3 and 4 show that for the longer 1991-2010 period the impact is 7 percent higher growth rate. The difference in magnitude between the sub-period and the overall period may be related to our data construction or possibly the existence of a threshold after which further deepening of the financial markets is unrelated to indicators of economic development which would be consistent with findings in the literature (Herwartz and Walle, 2014). Such a threshold could have been reached after the Grahm-Leach-Bailey Act or Financial Services Modernization Act of 1999.…”

Section: Resultssupporting

confidence: 75%

Agricultural credit and economic growth in rural areas

Hartarska

Nadolnyak

Shen³

2015

Agricultural Finance Review

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Purpose -In this paper, the authors set out to establish if there is a link between finance and economic growth in rural areas. The purpose of this paper is to evaluate the relation between credit by major lenders in rural areascommercial banks and Farm Credit System (FCS) institutionsand economic growth for the period 1991-2010. Design/methodology/approach -The motivation for this work comes from empirical studies showing a link between economic development and financial system development as well as from work which highlights the positive role of long-term finance provided by banks. The authors use two alternative panel data sets and fixed effects models to estimate the causal effect of credit supply (with lagged explanatory variables) on agricultural GDP growth per rural resident. Findings -The authors find a positive association between agricultural lending and agricultural GDP growth per rural resident with additional billion in loans (about a third of the actual average) associated with 7-10 percent higher state growth rate with this association stronger during the 1990s. Regional data confirm these results. The results point to a positive link between credit and economic growth in rural areas during that period, attributable to the lending by FCS institutions and by commercial banks. Research limitations/implications -Data availability limits the scope of this paper. The authors use state level balance sheet data available for the 1991-2003 period and annual data for [2003][2004][2005][2006][2007][2008][2009][2010] period. An additional regional data set is constructed for 1991-2010 with more aggregated data for the ten USDA agricultural production regions. The small number of panels limits the ability to use more sophisticated econometric models and the choice of dependent variables that captures economic growth. Practical implications -By provides evidence that agricultural finance and in particular lending contribute significantly to the growth of US agriculture, this paper contributes to the policy debate on weather support for agricultural finance initiatives is justified. Originality/value -The authors are not aware of another study that has linked agricultural lending by commercial banks and FCS institutions to growth in rural areas in the USA.

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Section: Resultssupporting

confidence: 75%

Agricultural credit and economic growth in rural areas

Hartarska

Nadolnyak

Shen³

2015

Agricultural Finance Review

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“…As anticipated in our introduction, opening up the economy to foreign capital flows and relaxing entry barriers into the banking sector are expected to promote greater financial development and stimulate domestic competition. In this process banks too may accrue efficiency gains, directly or indirectly, as a result of more possibilities to allocate resources to productive investments, improved risk diversification and management best practice, reduced transaction, overhead and information costs, and new financial instruments and services (Claessens et al, 2001;Hermes and Lensink, 2008;Levine, 2001;Laeven and Levine, 2007;Herwartz and Walle, 2014). Yet, as noted earlier, the empirical evidence on the impact of financial liberalization/openness on bank efficiency is mixed, with many studies reporting a negative effect.…”

Section: A Review Of Related Literaturementioning

confidence: 99%

Financial openness, risk and bank efficiency: Cross-country evidence

Luo

Tanna

Vita

2016

Journal of Financial Stability

109

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This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. ABSTRACTThis paper assesses the interrelationship between financial openness, bank risk and bank profit efficiency using a cross-country sample of 2,007 commercial banks covering 140 countries over the period 1999-2011. To establish whether the impact of financial openness on both bank risk and profit efficiency occurs directly or through each one of the two bank characteristics (efficiency and risk, respectively), we begin our analysis by investigating the potential reverse Granger causality between profit efficiency and risk using a dynamic simultaneous model via system GMM estimation. We then account explicitly for the role of bank risk in the estimation of bank profit efficiency using stochastic frontier analysis, allowing for the influence of different measures of financial openness and risk alongside other control variables. Our results indicate that financial openness reduces bank profit efficiency directly, not through changes in bank risk. We also find that financial openness increases bank risk indirectly, through the decreased bank profit efficiency channel. JEL Classification: G21; F36; C23; C24

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“…Furthermore, the intense competition fostered by international market may force some industries to improve efficiency and accordingly raise productivity. Herwartz and Walle (2014) argued that trade openness may lead to enhanced macroeconomic efficiency by providing access to new raw materials and products, low-cost intermediate goods, larger markets and latest technologies. (Yanikkaya, 2003).…”

Section: Theoretical Underpinningmentioning

confidence: 99%

ARDL Approach to Trade Libralisation and Economic Growth in the Developing Country: Evidence from Nigeria

Iheanacho¹

2017

Afr. Res. Rev.

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This study examined the trade impact of trade liberalization in the developing economies from 1981 to 2014. It employed the Autoregressive Distributed Lag (ARDL) bound test approach. Two measures of trade liberalization were used to form an index of trade openness, while three measures of financial sector development were used to construct index of financial development using principal component analysis. The result suggested that the long run impact of trade liberalization on the economic growth of Nigerian is found to be negatively significant. The short run impact of trade liberalization on economic growth was found to be positive and significant. In total, the long and short run impact of trade liberalization to economic growth suggested that the Nigeria economy is yet to harness the benefits of international trade. It was also suggested that trade liberalization could enhance economic growth. However, the introduction of other variables in the likes of financial development, labour force and gross capital formation, none played a significant impact on economic growth in the Nigeria. The findings of this study offer some important policy implications. Trade liberalization could be another avenue for economic diversification through foreign direct investment and by so doing there will be improved in gross capital formation and AFRREV VOL. 11 (2), S/NO 46, APRIL, 2017 139 Copyright © International Association of African Researchers and Reviewers, 2006-2017: www.afrrevjo.net. Indexed African Journals Online: www.ajol.info indeed economic growth. Nigeria also needs to create diversified, dynamic and competitive sectors capable of absorbing the more educated labour force to translate human capital to higher economic growth

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Openness and the finance-growth nexus

Cited by 45 publications

References 43 publications

Agricultural credit and economic growth in rural areas

Agricultural credit and economic growth in rural areas

Financial openness, risk and bank efficiency: Cross-country evidence

ARDL Approach to Trade Libralisation and Economic Growth in the Developing Country: Evidence from Nigeria

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