Three essays on economic growth : Financial innovation, human capital and foreign direct investment

The most recent global financial crisis has fueled arguments against financial innovation on the premise that it was especially the financially engineered complex products that triggered or paved the way to the crisis, which had detrimental effects on macroeconomic growth. Thus, there is considerable motivation to study and empirically test financial innovation and GDP growth relationship. In chapter 1, focus is to examine financial innovation and GDP growth relationships within an endogenous growth model. I explicitly aim to derive balanced growth path equilibrium and stability conditions for the endogenous growth model. Genuine proxy variable for financial innovation is defined. Also an iterative estimation technique panel non-linear least squares method with Gauss Newton algorithm is used to determine relation between per capita growth and financial innovation via simulation. In chapter 2 and 3, we aim to test whether the non-linear endogenous growth model explains relationship between per worker growth and other important growth determinants namely Human Capital and Foreign Direct Investment and also compare and contrast Financial Innovation empirical results with them.