Ronald Coase famously stated, "If you torture the data long enough, it will confess," underscoring the need for the replication of well-accepted empirical results. In Economics, replication is more honoured in the breach than the observance. As a departure, this paper assesses whether the 'burden of evidence' is met for a recent, widely-cited finding, with potentially deep policy implications - that the finance-growth relationship is non-monotonic and has a credit threshold above 100% of GDP that reduces economic growth. If this empirical fact is established beyond a reasonable doubt, then it could be pathbreaking in further developing our understanding of the link between finance and growth. We assemble the 'burden of evidence' through the comprehensive scrutiny of several vital aspects, viz., (i) an exhaustive list of 14 absolute and relative measures of financial development, (ii) replications and extensions across two global datasets, (iii) near exhaustive analytical trajectories, (iv) different functional forms, (v) unifying analytical approach, and (vi) analytical rigor. The 'burden of evidence' from almost 3,000 well-structured cross-sectional and panel estimates do not support the threshold effect, and where evidence is uncovered, the parameters imply the questionable policy implication that advanced economies need to scale back their relative levels of financial development to those of Eastern Europe to avoid the growth costs associated with over-developed financial systems. The findings reject the assertion that finance is excessive and reduces economic growth.

There has been a concomitant rise in R&D and the rate of economic growth in emerging countries. Analyzing a panel of 31 emerging countries, we find convincing evidence of scale effects which make government policies potent for long-run growth. This contrasts sharply with the well-known findings of Jones (1995a). Innovations show increasing returns to knowledge stock, implying that the diminishing returns assumed by some semi-endogenous growth models might not be generalized. International R&D spillovers raise the innovation bar. The observed growth rates of emerging economies appear in transition therefore their growth rates may recede with the passage of time.

We examine the robustness of R&D and productivity relationship in a panel of 16 OECD countries. We control for fifteen productivity determinants predicted by different theoretical models. Following the advances in non-stationary panel data econometrics, we estimate four variants of thirteen specifications. All models appear co-integrated. Results are rigorously scrutinized through extensive bootstrap simulations and sensitivity checks. R&D and human capital emerge robust in all specifications making them universal drivers of productivity across nations. Most other determinants are also significant. Productivity relationships are heterogonous across countries depending on their accumulated stocks of knowledge and human capital.

Global productivity growth has either stagnated or declined, despite continued technological innovations with the rise of knowledge-intensive intangibles that arise from the growth of knowledge stock (R&D activities). Understanding the root causes of this paradox in the context of growing economies requires an investigation of whether local knowledge diffusion can explain firm-level productivity differences, including key constraining factors like sources of financing or corporate governance structure. Using financial data of 7970 Indian firms over a 20-year period and clustering firms across industries, we assess the impact of R&D stock that is external to the firm through estimating both within (intra) and between (inter) industry spillovers. We find that both R&D and non-R&D-performing firms benefit from ‘between industry’ spillovers. We further show that firms with better access to finance achieve higher productivity, not only through their own R&D capital stock but also via both types of industry-level knowledge spillover. We allow for the two key sources of international spillovers namely import intensity and FDI. While import-intensive firms experience lower productivity, FDI mitigates this adverse productivity effect across knowledge-intensive exporting firms. The paper concludes that financially unconstrained firms and firms with greater corporate board connectedness derive positive industry-level spillover effects, reflecting intra- and inter-industry as domestic spillover or local value-chain effect in the literature on technological innovation.

Analyzing a novel dataset we find significantly positive effects of basic, and applied and experimental knowledge stocks on domestic output and productivity for a panel of 10 OECD countries. This letter updates the work of, among others, Mansfield (1980), Griliches (1986) and Adams (1990), at an international setting.

This paper takes the locally collected price-quotes used to construct the CPI index in the UK for the period 1996-2013 to explore the impact of the crisis on the pricing behavior of firms. We develop a time-series framework which is able to capture the link between macro- economic variables (in?ation and output) and the behavior of prices in terms of the frequency of price change, the dispersion of price levels and the dispersion of price-growth. Whilst these effects are present, they are small and do not have significant effects for monetary policy.

ABSTRACT This paper explores the geography of bank lending to small and medium-sized enterprises (SMEs) and tests the argument that large institutions with complex organizational structures are better able to filter ‘hard’ information than ‘soft’ information. Mortgage lending is used as a control to illustrate the case of ‘hard’ and ‘soft’ information. Using data on individual bank lending to SMEs and mortgages by postcode area in Great Britain for the period 2013(2)–2014(4), the paper explains the spatial dispersion of SME lending in the UK in terms of geographical distance and supports the policy of establishing a geographically decentralized financial system as a counterbalance.

China’s development policy since 1978 has differed across regions. With rapid aggregate growth has come widening regional inequality. The fiscal decentralisation reforms in 1994 shifted political pressure onto provincial officials to boost local growth through local public investments. These investments affect regional convergence by counteracting regulatory frictions in factor accumulation, and can also determine steady-state growth. However, the effect of public spending allocations across physical and human capital on growth and convergence processes is empirically unexplored for Chinese provinces. We take provincial time-series data on public spending by category, finding local public spending and its components augment convergence rates differently across regions. Spending on education and health contributes significantly more to growth and convergence than capital spending, confirming that the public capital-spending bias is not a local growth-optimising strategy. We suggest a policy of aligning local government promotion incentives to human capital targets to correct local resource misallocation.

Proponents of financial liberalization argue that deregulation motivates bankers to increase their effort and operate at a higher level of efficiency and productivity. Sceptics, however, see that liberalization engenders economic instability and banking crises, and impedes growth. Bank efficiency and productivity, following liberalization, is extensively examined. Nonetheless, the core issue of bankers’ self-motivation remains implicitly assumed and unaddressed. Does liberalization self-motivate bankers and increase their efforts and productivity? This paper models bank productivity from this perspective and evaluates what proportion of banks’ total factor productivity is accounted for by the self-motivated productivity of bankers. We provide a micro-founded framework for the analyses of bankers’ optimal level of effort and effort-driven productivity. Our model also captures banks’ unit input-output prices, optimal wages, bank spread and the overall cost of bank services – measures that are important in evaluating reform policies. We assess the financial liberalization of Nepal as a test case and find that (i) bankers’ efforts and productivity have notably improved in Nepal, although banking services have become costly, and (ii) bank spread has moderately declined in recent years. Our approach is parametric which differs from DEA, hence complements the literature. We hope this analytical framework will be useful to evaluate reform episodes elsewhere.

Empirical market microstructure literature widely employs the non-linear and non-Gaussian multiplicative error class of models (MEMs) in modelling the dynamics of trading duration and financial marks. It routinely maintains the weak exogeneity of duration vis-à-vis marks in estimations. However, microstructure theory states that trade duration, volume and transaction prices are simultaneously determined. We propose Lagrange-multiplier (LM) tests for weak exogeneity for the MEMs. Our LM tests are extensions of the weak exogeneity tests applicable to VAR or VECM models with Gaussian distributions. Empirical assessments show that (i) weak exogeneity is widely rejected by the data in the MEMs and (ii) the failure of weak exogeneity seriously biases parameter estimates. We hope our tests will be of interest in future empirical applications.

Research and Development (R&D) activities of emerging countries (EMEs) have increased considerably in recent years. Recent micro studies and anecdotal evidence points to industrialized countries as the sources of knowledge in EMEs. In this context, we examine ideas production and international knowledge spillovers in a panel of 31 EMEs by accounting for six diffusion channels and two types (national versus USPTO) of patent filings. Knowledge spillovers to EMEs accruing from (i) the industrialized world, (ii) the emerging world, (iii) different country and regional groups, (iv) selected bilateral cases, and (v) those within the regional clusters of EMEs, are modeled. Spillovers from the industrialized world appear robust via geographical proximity and disembodied channels only. Other conduits, including trade flows, are either insignificant or not robust. Spillovers from the emerging world are virtually non-existent. Analyses of regional clusters of EMEs do not support any role of language, culture or geographical characteristics in knowledge diffusion. Overall, the breadth and depth of knowledge spillovers to EMEs appear extremely moderate; however, we find pockets (specific countries and certain groups) generating positive spillovers. A carefully choreographed policy focusing on such pockets might be fruitful. We hope that this study (i) complements the micro literature, (ii) furthers the existing macro literature and (iii) provides some new policy insights. Our results are robust to a range of robustness checks, including the estimators – a cointegration approach versus a simple fixed effects OLS estimator.

The existing weight of evidence suggests that financial structure (the classification of a financial system as bank-based versus market-based) is irrelevant for economic growth. This contradicts the common belief that the institutional structure of a financial system matters. We re-examine this issue using a novel dataset covering 69 countries over 1989-2011 in a Bayesian framework. Our results are conformable to the belief - a market-based system is relevant - with sizable economic effects for the high-income but not for the middle-and-low-income countries. Our findings provide a counterexample to the weight of evidence. We also identify a regime shift in 2008. (C) 2016 Elsevier B.V. All rights reserved.

Alternative models of productivity predict a range of its determinants besides that of research and development (R&D). We investigate the robustness of R&D vis-à-vis a dozen productivity determinants in a panel of 16 Organisation for Economic Co-operation and Development countries through panel cointegration, bootstrap simulations and extensive sensitivity tests. Domestic knowledge stocks, international knowledge diffusion and human capital remain robust across all measures. The cross-country differences in accumulated knowledge stocks and human capital appear to explain productivity differences across countries.

UK executives' stock option exercises and associated sell decisions are motivated by private, inside, information. Executives use their inside information to lock in short‐term gains, and to sell stock acquired prior to negative abnormal stock returns. This informed trading is robust to the alternative factors that might motivate the exercise of executive stock options, including option moneyness and value of exercise. We suggest that the disparity in informed trading between US and UK executives' option trades is related to important differences in the proportion of executive remuneration linked to options, the regulation of options, and the taxation of option gains.

This article examines whether financial structure influences economic growth. Recent empirical studies examine this issue by utilizing panel and cross-section approaches. We use time series data and methods, along with the dynamic heterogeneous panel approach in a sample of six low and middle income countries. We find that cross country data cannot be pooled and that financial structure significantly affects real per capita output. We also find that panel estimates, in most cases, do not correspond to country specific estimates, and hence may proffer incorrect inferences for several countries of the panel.

We examine the dynamics of ideas production and knowledge-productivity relationship in a panel of 19 OECD countries. A new data set of triadic patents is used. We rigorously address the issues of cross-country heterogeneity and endogeneity. Domestic and foreign ideas stocks exert positive but heterogeneous effects on ideas production. We find evidence of duplicate RD however, this effect is modest for countries with sizeable ideas bases. An implication is that country-specific R&D policy appears potentially more effective than the one-size-fits-all approach.

Recent empirical work on financial structure and economic growth analyzes multi-country dataset in panel and/or cross-section frameworks and concludes that financial structure is irrelevant. We highlight their shortcomings and re-examine this issue utilizing a time series and a Dynamic Heterogeneous Panel methods. Our sample consists of fourteen countries. Tests reveal that cross-country data cannot be pooled. Financial structure significantly explains output levels in most countries. The results are rigorously scrutinized through bootstrap exercises and they are robust to extensive sensitivity tests. We also test for several hypotheses about the prospective role of financial structure and financial development on economic growth.