Literature Review On Determinants Of Economic Growth Economics Essay

Literature Review On Determinants Of stinting Growth Economics EssayThere are numerous of empirical research on sparing harvest-time has been done in the ago decades. The empirical study of determinant of stinting appendage by Barro (1991) has been an master(prenominal) reference to future study on the related fields. In this section, a brief review of factors that determine scotch growth will be presented. The influences consider here included disposal spending, splashiness, FDI and sell, financial growing, and European integration.The surface of the political sympathies expenditure and its affect on scotch growth has been acquire much attention in the past study. Ghali (1997) explored his research on the kindred between government expenditure and economic growth by tone at the fundamental interaction among the growth rate in per capita GDP and the cover of government spending in GDP over the period of 1960-1996. He used vector autoregressive analysis and Granger- causality in his study and found that at that place is no consistent evince that government spending can add Saudi Arabias per capita turnout growth.This answer was contrasted with the two study by Cheng and endure (1997), Loizides and Vamvoukas (2005). Both study suggested that government expenditure Granger-cause economic growth. Cheng and Tin (1997) express on the granger causality between government expenditure, money provide and economic growth in South Korea for the period of 1954-1994. They applying the same proficiency as Ghali (1997) and claimed that money supply affect growth as hale moreover money supply doesnt Granger-cause government expenditure.However, the study by Loizides and Vamvoukas (2005) think on the causal link between the size of the public heavens and real per capita income within the bivariate and trivariate frameworks on their sample countries of United Kingdom, Ireland and Greece. They do draw out three conclusions, first, public expenditur e Granger causes growth in the short run and extensive run in totally of the sample countries. Second, both bivariate and trivariare framework shows that increase in output would cause growth in public expenditure in Greece. Third, their trivariate ideal has indicates that causality from national income to public spending in Greece and British. Therefore, the different result from these study lead to a conclusion that in certain circumstances, changes of government expenditure do not necessary cause changes in the economic growth when government spending deliver ser crimes in an inefficiency way. flash was some other controversial debate issues. Malik and Chowdhury (2001) observed the human relationship between ostentation and GDP growth for quartet South Asian countries which is Bangladesh, India, Pakistan and Sri Lanka. They employed the co-integration and fracture correction models to the yearbook data retrieved from the IMF International Financial Statistics. They est ablished two results (i) flash and economic growth are positively and statistically importantly related for all four countries. (ii) the sensitivity of growth to changes in inflation rates is smaller than that of inflation to changes in growth rates. These results have important policy implication, that is, although moderate inflation foster economic growth feeds choke into inflation by stimulating the economy.Another study by Faria and Carneiro (2001) claimed a divergent view from Malik and Chowdhurry (2001). They have measure the relationship between inflation and economic growth in the context of Brazil which has been undergone severe inflation until recently. This study has constructed a bivariate time series model (vector autoregression) with annual data for the period between 1980 and 1995, they argued that although there is a negative relationship between inflation and economic growth in the short run, but in the immense run, economic growth does not affected by inflati on. Thus, this result supported the theories of hyperinflation usually associated with economic depress and political and friendly upheavals and as a result, it is against the perspective that inflations affects economic growth in the tenacious run.In addition to that, foreign direct investment (FDI) and trade were another influence that determined economic growth. Makki and Somwaru (2004) have analyze the role of FDI and trade in promoting economic performance across 66 developing countries, and the interaction among FDI, trade and economic growth by adopting unrelated regression (SUR) manner and instrumental variable (3-stage least squares) approach over the period of 1971-2001. They brought to four interesting results. First, the variables of FDI and trade have a strong positive relationship. Second, FDI stimulates municipal investment. Third, macroeconomic policies and institutional stability is the precondition for FDI-driven growth. Fourth, economic growth would facilitate d by a lowering inflation rate, tax burden, and government consumption.Similarly, the study of Yao (2006) wonder the effect of export and FDI on economic performance by use Pedrons panel unit root test, and Arellano and Bonds dynamic panel data estimating technique on the sample data of 28 Chinese provinces. This study has punctuate on two essential strategies that adopted by Chinese government to explained why China can be success in the long period. One was the export-push strategy that replaced the self-reliance and import substitution strategy and the other was the adoption of foreign technology and international business practices through the uses of FDI. Their data also indicated that openness can boost economic growth if the unexpected risk can be managed in the proper way.Financial development was the fourth factor. Liang (2006) inquired the impacts of financial development on the pattern of regional economic growth in China. The GMM approach has been employed in his res earch passim the period of 1990 to 2001. He mentioned that financial development portentous contributes to the economic growth in coastal region but not in the inland regions. Even though the structure and the size of financial field in China are the same, financial function provided by the financial sector might vary across region.Meanwhile, Ang and McKibbin (2007) included financial liberalization in his observation. This research evaluated whether financial development leads to economic growth or vice versa in the economy of Malaysia. Their analysis was consistent with Liang (2006), which is financial development leads to economic growth. Variety of approaches being used in this study and the empirical evidence asserts that financial sector development in Malaysia can be stirred through financial liberalization when the repressionist policies have been removed. Moreover, financial depth and economic development tends to have a positive relationship. They also view that econom ic growth would generate higher financial depth in the long run.Growth effectuate of European integration will be the last-place factors we discuss here. Henrekson et.al (1997), estimated the effects of European integration in EC and EFTA on economic growth. Their analysis has been conducted across a large sample of both developed and developing countries. They comprised a dummy for membership in EC or EFTA during 1976 -1985. They addressed that there is a significant and positive effects on economic growth but the effects became smaller and significant when the sample was restricted to 22 developed and OECD countries. The effects do not change for membership in EFTA as in the EC due(p) to the technology transfer instead of investment. All the empirical study by these researchers provided a useful guidance for both domestic policy makers and the development partners. Nevertheless, more prospects might be explored on the determinant of economic growth, specially corruption. As in Malaysia, it is a significant variable that should be well-tried on.