IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Access to External Finance and Innovation: A Macroeconomic Perspective

  • Sultan Mehmood

    ()

This article takes a macroeconomic perspective in studying innovation as one of the channels by which better access to financial markets affects economic development. The GMM difference and system estimators which accommodate country specific heterogeneity, endogenous explanatory variables and measurement errors are used to study a panel of 76 countries from year 1988 to 2010. It is found that better access to external finance is a significant factor positively and rapidly influencing innovation and hence long-run economic growth. This positive effect on innovation is robust to both bank and capital market lending with the adverse effect of reduced access to finance on innovation felt disproportionately by lower income countries. However, the estimations suggest that the magnitude of the bank as opposed to capital market lending channel is greater. Moreover, an analysis of the recent financial crisis reveals that the lack of liquidity had a large role to play in reduction of innovation post-crisis.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cpb.nl/sites/default/files/publicaties/download/cpb-discussion-paper-218-access-external-finance-and-innovation-macroeconomic-perspective.pdf
Download Restriction: no

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 218.

as
in new window

Length:
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:cpb:discus:218
Contact details of provider: Postal: Postbus 80510, 2508 GM Den Haag
Phone: (070) 338 33 80
Fax: (070) 338 33 50
Web page: http://www.cpb.nl/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Benfratello, Luigi & Schiantarelli, Fabio & Sembenelli, Alessandro, 2008. "Banks and innovation: Microeconometric evidence on Italian firms," Journal of Financial Economics, Elsevier, vol. 90(2), pages 197-217, November.
  2. Reinhart, Carmen M. & Rogoff, Kenneth, 2009. "Banking Crises: An Equal Opportunity Menace," CEPR Discussion Papers 7131, C.E.P.R. Discussion Papers.
  3. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
  4. Jeffrey A. Wurgler & Malcolm P. Baker, 2001. "Market Timing and Capital Structure," Yale School of Management Working Papers ysm181, Yale School of Management.
  5. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  6. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
  7. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
  8. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
  9. Arestis, Philip & Demetriades, Panicos O & Luintel, Kul B, 2001. "Financial Development and Economic Growth: The Role of Stock Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 16-41, February.
  10. Fulvio, Castellacci & Jose Miguel, Natera, 2011. "The dynamics of national innovation systems: a panel cointegration analysis of the coevolution between innovative capability and absorptive capacity," MPRA Paper 31583, University Library of Munich, Germany.
  11. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  12. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
  13. Jean Tirole, 2010. "Illiquidity and all its friends," BIS Working Papers 303, Bank for International Settlements.
  14. Christopher A. Sims, 2010. "But Economics Is Not an Experimental Science," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 59-68, Spring.
  15. Raghuram G. Rajan & Luigi Zingales, 1998. "Which Capitalism? Lessons from the East Asian Crisis," CRSP working papers 486, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  16. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  17. Wansbeek, Tom, 2001. "GMM estimation in panel data models with measurement error," Journal of Econometrics, Elsevier, vol. 104(2), pages 259-268, September.
  18. Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
  19. Henrik Hansen & John Rand, 2004. "On the Causal Links between FDI and Growth in Developing Countries," Discussion Papers 04-30, University of Copenhagen. Department of Economics.
  20. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  21. Hildegunn E. Stokke, 2008. "Productivity Growth and Organizational Learning," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 764-778, November.
  22. Min Ouyang, 2011. "On the Cyclicality of R&D," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 542-553, May.
  23. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  24. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  25. Enrico Berkes & Ugo Panizza & Jean-Louis Arcand, 2012. "Too Much Finance?," IMF Working Papers 12/161, International Monetary Fund.
  26. Schumpeter, Joseph A., 1947. "The Creative Response in Economic History," The Journal of Economic History, Cambridge University Press, vol. 7(02), pages 149-159, November.
  27. repec:ner:tilbur:urn:nbn:nl:ui:12-3125519 is not listed on IDEAS
  28. Stefan Lachenmaier & Horst Rottmann, 2007. "Effects of Innovation on Employment: A Dynamic Panel Analysis," CESifo Working Paper Series 2015, CESifo Group Munich.
  29. Gustavo Manso, 2011. "Motivating Innovation," Journal of Finance, American Finance Association, vol. 66(5), pages 1823-1860, October.
  30. Christopher Laincz & Pietro Peretto, 2006. "Scale effects in endogenous growth theory: an error of aggregation not specification," Journal of Economic Growth, Springer, vol. 11(3), pages 263-288, September.
  31. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May.
  32. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  33. Peretto, P. & Smulders, J.A., 2002. "Technological distance, growth and scale effects," Other publications TiSEM bdce08a7-4ad9-4427-a99e-f, Tilburg University, School of Economics and Management.
  34. Bhide, Amar, 1993. "The hidden costs of stock market liquidity," Journal of Financial Economics, Elsevier, vol. 34(1), pages 31-51, August.
  35. Stephen Bond & Céline Nauges & Frank Windmeijer, 2002. "Unit Roots and Identification in Autoregressive Panel Data Models: A Comparison of Alternative Tests," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C5-4, International Conferences on Panel Data.
  36. Stephen Cecchetti & Enisse Kharroubi, 2012. "Reassessing the impact of finance on growth," BIS Working Papers 381, Bank for International Settlements.
  37. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  38. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  39. repec:cup:jfinqa:v:46:y:2011:i:06:p:1545-1580_00 is not listed on IDEAS
  40. Piva, Mariacristina & Vivarelli, Marco, 2003. "Innovation and Employment: Evidence from Italian Microdata," IZA Discussion Papers 730, Institute for the Study of Labor (IZA).
  41. Gadi Barlevy, 2007. "On the Cyclicality of Research and Development," American Economic Review, American Economic Association, vol. 97(4), pages 1131-1164, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpb:discus:218. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.