Is public expenditure productive

Legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. Levine, Loayza, and Beck evaluate: Whether the level of development of financial intermediaries exerts a casual influence on economic growth. Whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth. Thorsten Beck may be contacted at tbeck@worldbank.org.

Financial Intermediation and Growth: Causality and Causes

http://faculty.haas.berkeley.edu/ross_levine/Papers/2000_JME_Fin%20Int%20Growth%20Causality.pdf

Financial intermediation and growth: Causality and causes ☆

The ultimate ownership of Western European corporations

In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.

/pdf/the-economic-consequences-of-legal-origins-3phhiol1rf.pdf

The Economic Consequences of Legal Origins

Benefits and costs of a higher bank “leverage ratio”

With the door closed on 2008, but the economic crisis still firmly planted on 2009's stoop, the Milken Institute has closely examined the root causes behind the buildup and collapse of the mortgage market. This report is a brief preview of the extensive data collection and in-depth analysis conducted by Milken Institute economists on the mortgage meltdown and the ensuing financial crisis. It provides insight and information that breaks through the rhetoric and attention-grabbing headlines, along with policy recommendations for moving forward.The download available here is an excerpt from The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Meltdown, available from John Wiley & Sons in May 2009.

The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Meltdown (An Excerpt)

This paper examines the impact of terrorism on economic growth and capital formation using data for 152 countries from 1970 to 2003.During the past thirty-five years, the world has witnessed nearly twenty thousand terrorist incidents. The increasingly global scope of terrorism has raised important questions about its economic impacts in countries around the world. We find that terrorist incidents have a negative and significant impact on economic growth and capital formation. We also find that the terrorist target matters. Specifically, terrorist incidents targeting private properties are negatively associated with both growth and capital formation.

Economic Impacts of Global Terrorism: From Munich to Bali

China has weathered the global financial turmoil in much better shape than most other countries, including the United States. However, there been concerns that banks loosened their lending standards too much as a result of a huge stimulus, among other factors. This led to excessive lending to individual home purchasers and rapidly rising housing prices that, in turn, may eventually lead to an increase in nonperforming loans at financial institutions should those prices collapse. The result, if corrective actions prove insufficient, could be a banking crisis that might require a government bailout. The crucial issue, therefore, is whether there is a housing bubble in major cities throughout the country that is about to burst. China has certainly experienced extraordinary growth in the housing market during the past decade, which has been accompanied by substantial increases in residential property prices. This report examines whether the decade of rapid growth in home prices in fact represents a housing bubble, and if so whether the authorities are able to achieve a "soft landing" in the housing market.

China's Housing Market: Is a Bubble About to Burst?

This paper studies the financing status of small and medium enterprises (SMEs) in transition economies. Factors causing financing obstacles are indentified and further analyzed to determine their influence over financing patterns. Bank regulatory practices relevant to SMEs’ access to bank loans and their influence over loan structures are identified. This study contributes to the existing body of knowledge by exploring the impact of specific bank regulatory practices on credit lending to SMEs in transition economies.

James R. Barth

Papers

Benefits and costs of a higher bank “leverage ratio”

The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Meltdown (An Excerpt)

Economic Impacts of Global Terrorism: From Munich to Bali

China's Housing Market: Is a Bubble About to Burst?

Small and Medium Enterprise Financing in Transition Economies