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The Growth-Finance Nexus in Brazil: Evidence from a New Dataset, 1890-2003

Author

Listed:
  • Nauro Campos

    (Brunel University, London)

  • Menelaos Karanasos

    (Brunel University, London)

  • Panagiotis Koutroumpis

    (Queen Mary University of London)

Abstract

This study revisits the growth-finance nexus using a new econometric approach and unique data set. In particular by employing the smooth transition framework and annual time series data for Brazil from 1890 to 2003, we attempt to address on the one side, what is the relationship between financial development, trade openness, political instability and economic growth and, on the other, how it changes over time. The main finding is that financial development has a mixed positive and negative time-varying impact on economic growth, which significantly depends on jointly estimated trade openness thresholds. Moreover our estimates highlight a positive impact of trade openness on growth but with interesting variation regarding their size and power, whereas the effect of political instability (both formal and informal) on growth is mainly negative. We also find that changes between regimes tend not to be smooth. Finally, our estimates show that in 57% of the years in which financial development has a below the mean effect, we find that trade openness experiences a substantial above the mean change.

Suggested Citation

  • Nauro Campos & Menelaos Karanasos & Panagiotis Koutroumpis, 2019. "The Growth-Finance Nexus in Brazil: Evidence from a New Dataset, 1890-2003," Working Papers 885, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:885
    as

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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2019/wp885.pdf
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    References listed on IDEAS

    as
    1. Sebastian Edwards, 1994. "Trade and Industrial Policy Reform in Latin America," NBER Working Papers 4772, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Economic growth; financial development; political instability; smooth transition models; trade openness;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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