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

The Levy Economics Institute Working Paper No. 362

35 Pages Posted: 18 Mar 2003

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Panicos Demetriades

University of Leicester - Department of Economics

Bassam Fattouh

University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

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.

Keywords: Capital Stock, Financial Development, Financial Policies

JEL Classification: G32

Suggested Citation

Arestis, Philip and Demetriades, Panicos O. and Fattouh, Bassam, Financial Policies and the Aggregate Productivity of the Capital Stock: Evidence from Developed and Developing Economies. The Levy Economics Institute Working Paper No. 362. Available at SSRN: https://ssrn.com/abstract=371101 or http://dx.doi.org/10.2139/ssrn.371101

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Panicos O. Demetriades

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
+ 44 116 252 2835 (Phone)
+ 44 116 252 2908 (Fax)

HOME PAGE: http://www.le.ac.uk/economics/staff/pd28.html

Bassam Fattouh

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom
+020 7898 4053 (Phone)
+020 7898 4089 (Fax)

University of London - Centre for Financial and Management Studies (CeFIMS)

Exhibition Road
London, WC1E 7HU
United Kingdom

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