Publication:
A contribution to the empirics of convergence in real GDP growth: The role of financial crises and exchange-rate regimes

Loading...
Thumbnail Image
Full text at PDC
Publication Date
2014-03
Advisors (or tutors)
Editors
Journal Title
Journal ISSN
Volume Title
Publisher
Asociación Española de Economía y Finanzas Internacionales
Citations
Google Scholar
Research Projects
Organizational Units
Journal Issue
Abstract
This paper investigates the convergence in real Gross Domestic Product (GDP) growth focusing on the impact of financial crises (i.e. banking crises, currency crises and debt crises) and nominal exchange rate regimes (i.e. fixed, intermediate and flexible) on convergence. To that end, we compute four convergence indicators (s-convergence, g- convergence, absolute b-convergence and conditional b-convergence), for 163 countries classified into four income groups during the 1970-2011 period. Results suggest that: (i) There is evidence in favor of β-convergence and β-convergence only for high income countries; (ii) absolute and conditional β-convergence are presented in each of the four income groups of countries under study; (iii) exchange-rate regimes seem to play some role in upper-middle and lower-middle income countries; and (iv) financial crises have a negative and significant impact on GDP growth independently of the level of income of countries.
Description
Keywords
Citation
Acemoglu, D. (2009). Introduction to modern economic growth. The MIT Press. Bailliu, J., Lafrance, R. and Perrault, J. F. (2003) Does exchange rate policy matter for growth?, International Finance, 6, 381-414. Barro, R. J. and Sala-i-Martin, X. (1991): Economic growth, The MIT Press, Boston, MA. Barro, R. J. and Sala-i-Martin, X. (1992): Convergence, Journal of Political Economy 100, 223- 251. Baumol, W. (1986): Productivity growth, convergence, and welfare: What the long run data show, American Economic Review 76, 1072-1085. Boyle, G. E. and McCarthy, T. G. (1997): A simple measure of beta convergence, Oxford Bulletin of Economics and Statistics 59, 257-264. Boyle, G. E. and McCarthy, T. G. (1997): Simple measures of convergence in per capita GDP: a note on some further international evidence, Applied Economics Letters 6, 343-347. Claessens, S., M. A. Kose, and Terrones, M. (2010): The global financial crisis: How similar? How different? How costly?, Journal of Asian Economics 21, 247-264. Claessens, S., M. A. Kose, and Terrones, M. (2012): How do business and financial cycles Interact?, Journal of International Economics 87, 178-190. De Gregorio, J. and Guidotti, P. E. (1995): Financial development and economic growth, World Development, 23, 433–448. Dwyer, G. P., Devereux, J., Baier, S. L. and Tamura, R. (2013): Recessions, growth and financial crises, forthcoming in Journal of International Money and Finance. Edwards, S. and Levy-Yeyati, E. L. (2003) Flexible exchange rates as shock absorbers, European Economic Review, 49, 2079-2105. Frankel, J. A. (1999): No single currency regime is right for all countries or at all times, Working Paper 7338, National Bureau of Economic Research. Heston, A., Summers, R. and Aten, B. (2012): Penn World Table Version 7.1, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania. Ilzetzki, E. O., Reinhart, C. M. and Rogoff, K. S. (2011): Exchange rate arrangements entering the 21st century: Which anchor will hold? Unpublished; University of Maryland and Harvard University. Islam, N. (2003): What have we learnt from the convergence debate?, Journal of Economic Surveys 17, 309–362. King, R. G. and Levine, R. (1993a): Finance and growth: Schumpeter might be right, Quarterly Journal of Economics 108, 717– 738. King, R. G. and Levine, R. (1993b): Finance, entrepreneurship and growth: Theory and evidence, Journal of Monetary Economics 32, 513– 542. Laeven, L., Valencia, F. (2008): Systemic banking crises: A new database. Working Paper WP/08/224, International Monetary Fund. Levine, R., Loayza, N. and Beck, T. (2000): Financial intermediation and growth: causality and causes, Journal of Monetary Economics 46, 31– 77. McKinnon, R.I., 1973. Money and Capital in Economic Development. Brookings Institution, Washington, DC. Mundell, R. A. (1995) Exchange rate systems and economic growth, Rivista di Politica Economica, 83, 3-36. Neusser, K. and Kugler, M. (1998): Manufacturing growth and financial development: evidence from OECD countries, Review of Economics and Statistics 80, 638–646. Obstfeld, M. and Rogoff, K. (2000) New directions for stochastic open economy models, Journal of International Economics, 50, 117-153. Quah, D. (1993): Galton`s fallacy and the convergence hypothesis, Scandinavian Journal of Economics 95, 427-443. Petreski, M. (2009) Exchange-rate regime and economic growth: A review of the theoretical and empirical literature, Economics. Discussion Paper No. 2009-31, Kiel Institute for the World Economy, Kiel. Reinhart, C. (2010): This time is different chartbook: Country histories on debt, default, and financial crises. Working Paper 15815, National Bureau of Economic Research. Reinhart, C. M. and Rogoff, K. S. (2004): The modern History of exchange rate arrangements: A reinterpretation, Quarterly Journal of Economics 119, 1-48. Reinhart, C. M. and Rogoff, K. S. (2009): This time is different: Eight centuries of financial folly, Princeton: Princeton University Press. Reinhart, C. M. M. and Rogoff, K. S. (2014): Recovery from financial crises: Evidence from 100 episodes, Working Paper 19823, National Bureau of Economic Research. Sala-i-Martin, X. (1996): Regional cohesion: Evidence and theories of regional growth and convergence, European Economic Review 40, 1325–1352. Siegel, S. (1956): Nonparametric Statistics for the Behavioural Sciences , McGraw-Hill, New York. Solow, R. M. (1956): A contribution to the theory of economic growth, Quarterly Journal of Economics 70, 65–94. Sosvilla-Rivero, S. and Ramos-Herrera, M. C. (2014): Exchange-rate regimes and economic growth: An empirical evaluation, forthcoming in Applied Economics Letters. Swan, T. (1956): Economic growth and capital accumulation, Economic Record 32, 334–361. Temple, J. (2000): Inflation and growth: Stories short and tall, Journal of Economic Surveys 14, 395–426.