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Financial Policies and the Aggregate Productivity of the Capital Stock: Evidence from Developed and Developing Economies

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  • Philip Arestis

    ()
    (Levy Economics Institute)

  • Panicos Demetriades

    (University of Leicester)

  • Bassam Fattouh

    (CeFiMS, SOAS)

Abstract

We collect data on a number of financial restraints, including restrictions on interest rates and capital flows and reserve and liquidity requirements, and capital adequacy requirements from central banks of 14 countries. We estimate the effects of these policies on the aggregate productivity of the capital stock, controlling for the effects of inputs and financial development and using modern econometric techniques. We find that financial development has positive effects on productivity, while the effects of financial policies vary considerably across countries. Our findings demonstrate that financial liberalization is a much more complex process than has been assumed by earlier literature, and its effects on macroeconomic aggregates are ambiguous.

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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 29 (2003)
Issue (Month): 2 (Spring)
Pages: 217-242

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Handle: RePEc:eej:eeconj:v:29:y:2003:i:2:p:217-242

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
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Web page: http://www.ramapo.edu/eea/journal.html
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Keywords: Bank; Capital Flow; Capital; Development; Reserves;

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References

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Cited by:
  1. Marialuz Moreno Badia & Veerle Slootmaekers, 2008. "The Missing Link Between Financial Constraints and Productivity," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 20808, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  2. Arestis, Philip & Basu, Santonu, 2004. "Financial globalisation and regulation," Research in International Business and Finance, Elsevier, Elsevier, vol. 18(2), pages 129-140, June.
  3. Majumder, Md. Alauddin & Eff, E. Anthon, 2012. "The link between economic growth and financial development: Evidence from districts of Bangladesh," MPRA Paper 44122, University Library of Munich, Germany.
  4. Felix Rioja & Neven Valev, 2004. "Finance and the Sources of Growth at Various Stages of Economic Development," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 42(1), pages 127-140, January.
  5. Ang, James B., 2011. "Financial development, liberalization and technological deepening," European Economic Review, Elsevier, Elsevier, vol. 55(5), pages 688-701, June.

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