Browsing by Subject "Financial Development"

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Open Access
Essays on uncertainty
(2015) Karaman, Seçil Yıldırım
This dissertation consists of three essays on the real impacts of uncertainty shocks. The first essay develops a theoretical model to investigate the impact of financial market uncertainty on real economic downturns. The second and third essays empirically investigate the differences in the adverse impact of uncertainty shocks on real output for countries with different financial development levels and central bank characteristics. The first essay investigates whether financial market volatility induces real downturns in a dynamic stochastic general equilibrium framework with heterogenous agents. In the model, an increase in the volatility of future stock price expectations of nonsophisticated agents causes an increase in the volatility of stock prices. In response to the increase in stock price volatility, the model generates reduction in consumption, investment, employment and output. The model contributes to the literature by modeling financial market volatility in a general equilibrium framework, highlighting the mechanisms through which the impact works, and providing estimates of its magnitude. The second essay investigates whether financial development moderates the negative impact of uncertainty shocks on real economic activity. To test this conjecture, I compare the impact of macro level uncertainty as measured by stock market volatility on real GDP growth for countries with different financial development levels. To address potential endogeneity concerns, the estimation is made using Two Stage Least Squares technique where plausibly exogenous disaster shocks are used as instruments for stock market volatility. The estimation results based on a panel data set of 54 countries between 1971 and 2009 are consistent with the conjecture that uncertainty shocks hurt countries with developed financial markets less. The third essay investigates the role of institutional characteristics of the central banks in moderating the negative consequences of uncertainty shocks using the same identification strategy as the second essay. The results provide strong evidence that central bank independence reduces the adverse effects of uncertainty shocks. As for the impact of central bank transparency, while in some specifications the results support its mitigating impact on the adverse effect of uncertanity, in others it doesn’t have a significant moderating impact. In the light of the restrictions on the transparency data set which spans 44 countries between 1998 and 2009, more comprehensive studies may be needed to reach a stronger verdict for its impact.
Open Access
Financial development and productivity a panel data approach
(2006) Afyonoğlu, Burcu
Much ink has been spilled over the relation of financial market development and economic growth. Productivity growth is one of the main sources of economic growth. In this study we empirically examine the role of financial sector development in enhancing productivity growth, in a group of industrial and developing countries using panel data from 1965 to 1990. The productivity is measured by Malmquist index, introduced by Fare et al. (1994). This measure of productivity change index computes the productivity change from one year to another and furthermore it is possible to decompose the productivity change into efficiency change (diffusion) and technical change (innovation) components. Generalized Method of Moments techniques are applied where the results indicate that there is a significant effect of some financial development not only on Malmquist index but also on its components.