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Book part

Rémy Herrera

This chapter is a radical critique of the neoclassical growth theory, justifying ways out of mainstream economics. It has three parts. The first one analyzes growth

Abstract

This chapter is a radical critique of the neoclassical growth theory, justifying ways out of mainstream economics. It has three parts. The first one analyzes growth theories from the Classical representation to the endogenous growth models. The second part demonstrates that the “new growth theory” is not a break with Solow's formalization. To prove it, we build an original Solowian endogenous growth model. Then, this neoclassical macrodynamic framework is technically, deeply critized in a third part. We show that both exogenous and endogenous neoclassical models prove to be incapable to explain growth in the long period. We concentrate on the ambiguities surrounding the hypothesis of single agent, as well as on the role of the state, in particular when it is considered as a “planner” by the neoclassicals. Endogenous growth models do not correspond to macrodynamization of the Walrasian general equilibrium, nor have solid microeconomic bases. We advocate in favor of rehabilitating state's intervention in social areas and of reactivating Marxist theoretical reflections regarding social planning and class analysis in the current time of structural crisis of the capitalist world system.

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Revitalizing Marxist Theory for Today's Capitalism
Type: Book
ISBN: 978-1-78052-255-5

Abstract

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Optimal Growth Economics: An Investigation of the Contemporary Issues and the Prospect for Sustainable Growth
Type: Book
ISBN: 978-0-44450-860-7

Abstract

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Optimal Growth Economics: An Investigation of the Contemporary Issues and the Prospect for Sustainable Growth
Type: Book
ISBN: 978-0-44450-860-7

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Article

Orlando Gomes

The purpose of this paper is to develop growth models that depart from the conventional framework, in the sense that consumption decisions take into account previous…

Abstract

Purpose

The purpose of this paper is to develop growth models that depart from the conventional framework, in the sense that consumption decisions take into account previous periods' expectations about output fluctuations. Households will raise their propensity to consume in periods of expected expansion and they will lower it in phases of predictable recession. Such a framework allows discussion of how growth trends may be disturbed over time as the result of changes in consumer sentiment.

Design/methodology/approach

Endogenous growth models are generally designed to address long‐term trends of growth. They explain how the economy converges with or diverges from a balanced growth path and they characterize aggregate behavior, given the optimization problem faced by a representative agent that maximizes consumption utility. In such frameworks, only potential output matters and all decisions, by firms and households, are taken on the assumption that any expectations on the value of the output gap do not interfere with the agents' behavior. Introducing consumer sentiment, a conventional growth model is modified in order to understand how effective output eventually deviates from the balanced growth path.

Findings

The proposed framework allows one to introduce nonlinear dynamics into the model, making it feasible to obtain, for reasonable parameter values, endogenous fluctuations. These are triggered by a Neimark‐Sacker bifurcation.

Originality/value

By introducing consumer confidence or consumer sentiment, it is possible to integrate the evaluation of growth and cycles into a unified framework. It is possible to explain business cycles as the result of the consumers' reaction to the expected performance of the economic system.

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Journal of Economic Studies, vol. 37 no. 4
Type: Research Article
ISSN: 0144-3585

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Abstract

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Optimal Growth Economics: An Investigation of the Contemporary Issues and the Prospect for Sustainable Growth
Type: Book
ISBN: 978-0-44450-860-7

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Article

Mohammed Ayoub Ledhem and Mohammed Mekidiche

The purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey…

Abstract

Purpose

The purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey and Saudi Arabia within the endogenous growth model framework.

Design/methodology/approach

This study applied dynamic panel system GMM to estimate the impact of the financial performance of Islamic finance on economic growth using quarterly data (2014:1-2018:4). CAMELS system parameters were employed as variables of the financial performance of Islamic finance and gross domestic product (GDP) as a proxy of economic growth. The sample contained all Islamic banks working in the five countries.

Findings

The findings demonstrated that the only significant factor of the financial performance of Islamic finance, which affects the endogenous economic growth, is profitability through return on equity (ROE). The experimental findings also indicated the necessity of stimulating other financial performance factors of Islamic finance to achieve a significant contribution to economic growth.

Practical implications

The analysis in this paper would fill the literature gap by investigating the link between financial performance of Islamic finance and economic growth, as this study serves as a guide for the academians, researchers and decision-makers who want to achieve economic growth through stimulating Islamic finance in the banking sector. However, this study may well be extended to investigate the link between the financial performance of Islamic finance and economic growth over the Z-score model as another measure for the financial performance of Islamic finance.

Originality/value

This paper is the first that investigates the link between financial performance of Islamic finance and economic growth empirically using CAMELS parameters within the endogenous growth model to provide robust information about this link based on a sample of the top pioneer Islamic finance countries.

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Islamic Economic Studies, vol. 28 no. 1
Type: Research Article
ISSN: 1319-1616

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Article

Orlando Gomes

This paper seeks to explain how inefficient learning rules may lead to a perception of economic and ecological realities that may be systematically distorted in the long run.

Abstract

Purpose

This paper seeks to explain how inefficient learning rules may lead to a perception of economic and ecological realities that may be systematically distorted in the long run.

Design/methodology/approach

The paper evaluates long‐term growth in standard growth‐pollution models. Expectations about future levels of pollution are formed under adaptive learning.

Findings

Socio‐economic players (private agents, governments, non‐profit organizations and/or groups of states) may fail in understanding, with full accuracy, long‐term environmental conditions. The perception about environment threats acquires a cyclical nature, even when ecological problems evolve steadily.

Research limitations/implications

Relevant policy implications emerge if the agent is unable to compute the true levels of environmental pollution that will persist in the steady state. Authorities of several kinds are likely to underestimate or overestimate ecological problems.

Practical implications

The learning approach to the perception of the environment can be applied to other economic, social and biological issues, besides material growth. For instance, it can contribute to explain some cases of over‐exploitation of resources: even in the presence of a social planner capable of avoiding typical “tragedy of the commons” situations, this entity may fail in perceiving the reality and, thus, in applying the policies that prevent the exhaustion of resources.

Originality/value

The paper contributes to the literature on growth and environmental issues, but takes a step forward: it approaches not only the observed relation between economy and ecology, but also the impact over the observed relation of a systematically incorrect interpretation of such a connection.

Details

Sustainability Accounting, Management and Policy Journal, vol. 2 no. 1
Type: Research Article
ISSN: 2040-8021

Keywords

Content available
Article

Mohammed Ayoub Ledhem

This paper aims to investigate empirically whether Sukuk financing is boosting the economic growth in Southeast Asia within the framework of the endogenous growth model.

Abstract

Purpose

This paper aims to investigate empirically whether Sukuk financing is boosting the economic growth in Southeast Asia within the framework of the endogenous growth model.

Design/methodology/approach

This paper applied dynamic panel one-step system generalized method of moments as an optimal estimation approach to investigate the impact of Sukuk financing on economic growth in Southeast Asia spanning from 2013Q4–2019Q3. Sukuk financing was proxied by the total issued Sukuk holdings, while economic growth was proxied by gross domestic product. The sample covered all full-fledged Islamic financial institutions in the most developed Sukuk financial markets countries in Southeast Asia (Malaysia, Indonesia and Brunei).

Findings

The findings demonstrated that Sukuk financing is boosting economic growth in Southeast Asia, which reflects the significant role of the Islamic financial markets of Sukuk as a vital contributor to economic growth.

Practical implications

This paper would fill the literature by investigating the link between Sukuk financing and economic growth in Southeast Asia within the framework of the endogenous growth model, as the outcome of this paper serves as a guide for financial researchers, decision-makers and policymakers to improve the Sukuk market globally as an alternative financing source for the best contribution to economic growth.

Originality/value

This paper is the first that investigates empirically the link between Sukuk financing and economic growth in Southeast Asia with a new theoretical context of the endogenous growth model to gain robust information about this link.

Details

PSU Research Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2399-1747

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Article

Musa Jega Ibrahim

This paper seeks to explore the factors behind the slow growth of economies with abundant oil and gas resources, despite the opportunities these resources potentially represent.

Abstract

Purpose

This paper seeks to explore the factors behind the slow growth of economies with abundant oil and gas resources, despite the opportunities these resources potentially represent.

Design/methodology/approach

The building blocks of standard economic growth models and the implication of natural resource utilisation is the methodological and analytical approach adopted. A qualitative analysis of the impact of oil and gas activities on the growth of the Nigerian economy is carried out using relevant macroeconomic indicators.

Findings

The oil and gas sector is imbued with enormous linkage potentials that can stimulate other sectors to generate endogenous growth. Emphasis on the extraction and export of oil and gas subverts technological progress, stifles the revenue earning potential of the economy and stultifies the effectiveness of factors of production, thereby retarding economic growth.

Research limitations/implications

Data on technological input into oil and gas activities could not be obtained, but the changing pattern of productive capacity, especially in the downstream sub‐sector, is used as a measure of technological change.

Practical implications

Oil‐ and gas‐abundant economies can exploit potential comparative advantage by creating favourable conditions in value‐adding oil and gas activities. Through spill‐over effects a wide range of economic activities evolves, with concomitant market expansions. Positive externalities for learning‐by‐doing arising from this process can lead to endogenous technological progress to drive sustainable economic growth.

Originality/value

The findings show that rather than reliance on foreign exchange revenues from oil and gas, creating the appropriate conditions for the effective domestic utilisation of oil and gas resources to bolster inter‐sectoral linkages is a more virile strategy for oil‐and‐gas driven economic growth.

Details

Journal of Economic Studies, vol. 35 no. 2
Type: Research Article
ISSN: 0144-3585

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Article

John Roufagalas and Alexei G. Orlov

The purpose of the paper is twofold: to construct and analyze a novel endogenous growth model, in which unbounded growth is possible without the need to assume increasing…

Abstract

Purpose

The purpose of the paper is twofold: to construct and analyze a novel endogenous growth model, in which unbounded growth is possible without the need to assume increasing returns to scale, and to use the model to estimate the long-run (or dynamic) costs of recessions.

Design/methodology/approach

In the proposed model, endogenous technology and human capital accumulation serve as the “twin engines of growth.” Simulations are used to derive growth rates consistent with long-term experience of developed countries, to understand better the differences between balanced growth and unbounded growth and to provide an estimate of the dynamic costs of capacity utilization shocks that produce business cycle-like behavior.

Findings

Conservative calculations show that the costs of the capacity shocks can be large – about 1.5 percent of the present value of output over a 100-period horizon. The theoretical model also suggests that differences in the technology production and human capital accumulation functions, possibly due to differing institutions, may help explain diverse growth experiences.

Originality/value

The paper, for first time, combines two strands of the economic growth theory – endogenous technology and endogenous human capital production – into a single model. It uses the implications of the model to argue, through simulations, that the benefits of counter-cyclical policies are potentially large in the long run.

Details

Journal of Economic Studies, vol. 47 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

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