Finance-growth nexus in presence of banking crises: Evidence in high income and MENA countries
Houssem Rachdi
The important role of financial development in the process of economic growth has been subject to numerous debates in the economics literature. Results of empirical studies for single-country and cross-nations are often inconclusive. One neglected area in this topic of research is the presence of crises because any countries were devastated by financial and banking crises the two last decencies. The main contribution of this paper is the analysis of the correlation between financial development and economic growth in the presence of banking crises. We explore this relationship by using the GMM system approach. Our study examines twenty nine high income (OECD and non-OECD) and seven Middle East and North Africa (MENA) countries for the years 1980-2009. Our econometric results show a negative coefficient between banking crises and economic growth. Also, we also find a negative coefficient of different measures of financial development. In periods of crises, the effectiveness of financial system is reduced leading to less growth.
Submission Date: 13-11-2011 2:14 PM

Model Equations Complement to the Article submitted to the Journal of Policy Modeling Titled The Euro-Mediterranean Free Trade Agreement An Inquiry into the Cost of Adjustment to Tariff Liberalization for the Egyptian Economy An Intertemporal General Equilibrium Analysis
Abeer Elshennawy
Abeer Elshennawy
:Interteporal General Equilibrium Model for Egypt:Model Equations
Submission Date: 28-11-2011 1:58 PM

Optimizing the performance of irrigated agriculture in Eastern England under different water pricing and regulation strategies
Panagiotis Mitropoulos
Konstantinos Vasileiou
Ioannis Mitropoulos
Irrigation shortage is becoming an increasingly serious problem in agricultural production. Growing pressure on water resources is leading to increasing restrictions on abstraction for irrigation and consideration of the use of economic instruments, such as increased abstraction charges and/or tradable licences, to restrict demand and encourage wiser use of water. We evaluate irrigation using selected economic, social and environmental indicators of performance, including the value of water used for irrigation. A linear programming model is developed and used to simulate possible responses by irrigators and the impact on irrigation performance of intervention measures, namely abstraction quota restrictions and volumetric pricing that might be used to ration water and/or increase water use efficiency. Through the use of parametric programming a scenario analysis is performed to a case study in eastern England with regard to perturbations of irrigation water under alternative policy instruments.
Submission Date: 18-05-2011 7:19 AM

MULTIVARIATE GRANGER CAUSALITY BETWEEN ELECTRICITY CONSUMPTION, ECONOMIC GROWTH, FINANCIAL DEVELOPMENT, POPULATION, AND FOREIGN TRADE IN PORTUGAL
Chor Foon Tang
Muhammad Shahbaz
The present paper attempts to re-assess the nexus between electricity consumption, economic growth, financial development, population and foreign trade in Portugal with the cointegration test proposed by Pesaran et al. (2001). The Granger causality test was implemented to ascertain the direction of causality between the variables. This study used the annual sample from 1970 to 2009. Our empirical results show that the variables are cointegrated in Portugal. Moreover, the overall Granger causality results exhibit that electricity consumption, economic growth, and population are Granger-causes each other while financial development Granger-cause electricity consumption in Portugal. With these findings, we affirm that energy is an important source for Portugal; hence energy conservation policy may deteriorate economic growth in Portugal.
Submission Date: 10-11-2011 7:21 PM

The Environmental Effects of Human Capital Investment in Rural-Urban Migration by the Chinese Government and Producer Services Sector
Xiaochun Li
In this paper, we conduct a simple comparative static analysis of environmental and economic effects of the government and producer services sector training of rural-urban migrants. We mainly focus our attention on the environmental issues and get the following conclusions: When the government lowers the interest rate of the training loan, environmental conditions will worsen. However, when the producer services sector increases the unit cost of training of rural laborer, the opposite occurs, and environmental conditions improve. In addition, we discuss the conditions under which the government lowering the interest rate of the training loan will lead to the decrease of the social utility level and the reduction of pollution damages to the agricultural production.
Submission Date: 02-11-2011 12:51 AM

THE YIELD CURVE AND MACROECONOMIC VARIABLES IN THE PRESENCE OF POLICY CHANGE: EVIDENCE FROM TURKEY
Huseyin Kaya
This paper contributes to the literature on the relationship between the yield curve and macroeconomic variables by focusing on an emerging market case: Turkey. The most important result of the paper is that the relationship between the yield curve and the macroeconomic variables is seriously affected by the change in monetary policy which is associated with the implementation of inflation targeting (IT) regime. While before IT regime, yield curve is affected to some extend by macroeconomic variables after IT regime, it is mainly driven by the macroeconomic variables. We also find that central bank has gained ability to affect entire yield curve with IT regime. The other important result is that in addition to inflation and real activities, exchange rate is also play an important role in the yield curve dynamics.
Submission Date: 06-10-2011 6:31 AM

Monetary Policy in a Dual Currency Environment
Vicente Tuesta
We develop a small open economy general equilibrium model with sticky prices and partial dollarization - a situation where both domestic and foreign currencies coexist-. We derive a tractable representation of the model in terms of domestic inflation and the output gap in which a trade-off, which depends on the degree of dollarization, arises endogenously due to the presence of foreign interest rate shocks. We use this framework to show analytically how higher degrees of dollarization induce larger volatilities of the output gap and inflation, thus hampering a central bank
Submission Date: 02-09-2011 10:35 AM

Enforcement Leverage with Fixed Inspection Capacity
Lirong Liu
Williams Neilson
We expand the optimal targeting enforcement literature to allow regulator inspection capacity constraints. A fixed number of firms are selected for inspection and those with the highest emissions are targeted with higher inspection probability. This structure induces dynamic rank-order tournaments among inspected firms, and pollution abatement incentives from the leverage effect are enhanced by a competition effect. Simulations suggest that targeted firms should be inspected with high probability and that about 2/3 of inspections should be allocated to targeted firms. However, even suboptimal allocations of inspections and firms to the targeted and untargeted groups can outperform static enforcement schemes.
Submission Date: 20-12-2011 11:07 AM

Using the Cointegrated VAR to Model and Commparatively Assess the Empirical Effects of Commodity and Financially Focused Policy Alternatives for U.S. Pork-Related Markets
Ronald Babula
Ronald A. Babula
John Paul Rothenberg
Abstract: This paper provides an application of cointegration VAR modeling to estimate a monthly system of U.S. upstream/downstream U.S. pork-related markets that includes a policy transmission mechanism through price to the U.S. pork futures market. The paper then demonstrates that financially focused policies/events working through futures price are equally as effective as commodity-focused policies/events working through U.S. pork price in influencing the modeled markets, and in turn in addressing and managing inter-market patterns of pork product food costs and food inflation. The policy-analytic usefulness of the cointegrated VAR model is then demonstrated through the use of the estimated cointegrating parameters to examine two specific past policies/events relevant to U.S. pork markets.
Submission Date: 20-01-2012 11:52 AM

Interaction between Monetary policy and stock prices: A comparison between the Caribbean and the US
Emma Iglesias
Andre Haughton
We analyze the interaction between monetary policy and stock prices in Barbados, Jamaica and Trinidad and Tobago (T&T), both individually and jointly as the Caribbean countries using structural VARs as proposed in Bjornland and Leitemo (2009). Annual and monthly frequencies are used for Barbados while, due to data availability constraints, only annual data is employed for Jamaica and T&T. First, our results show that in Barbados with monthly (and annual) data, a monetary policy shock that increases the Treasury bill rate by 100 basis points causes stock prices to increase by 0.038 (and fall by 0.06) %; while a stock price shock that increases stock prices by 1% results in an increase in the Treasury bill rate of 30 (and 190) basis points respectively. For Jamaica, a monetary policy shock causes stock prices to fall by 0.3%; while a stock price shock that increases stock prices by 1% results in an increase in the Treasury bill rate of 400 basis points. Likewise for T&T; a shock to monetary policy causes stock prices to fall by 0.1% and a shock leading to a 1% increase in real stock prices causes the Treasury bill to increase by 330 basis points. When we analyse the three Caribbean countries jointly; a positive 1% stock price shock causes the Treasure bill rate to increase by 700 basis points and a positive monetary policy shock cause stock price to fall by 0.027%. Therefore, our results in relation to the signs of the relationships with annual data are similar to those of the USA in Bjornland and Leitemo (2009), however the magnitudes are substantially different. The effect of a monetary policy shock is greater in the US; while the effect of a stock price shock is smaller in the US than in our Caribbean We argue that this reflects clear differences between the USA and Caribbean economies. Caribbean countries have slower information channels for example by targeting the thirty day certificate of deposit (COD) rate instead of the overnight Treasury bill rate as in the US. This supports our results that only with annual data we find similar relationships as in the US with monthly data. Moreover, the higher economic instability in the Caribbean is clearly observed in the larger effect that a stock price increase has on interest rates versus the USA.
Submission Date: 21-10-2011 2:25 PM

A Small Macroeconometric Model of the Bangladesh Economy
Mohammad Rahman
Rabeya Khatoon
This paper describes a macroeconometric model of the Bangladesh econ- omy using annual time series data from FY-1980 to FY-2006. The model is constructed with seven macroeconomic blocks, consumption, investment, pro- duction, government, trade, money, and price, capturing transmission among blocks. Structural equations under each block are estimated using short-run error correction model, where long-run equations into error correction terms represent economic theory. Hendry\\\'s general to a specic procedure is followed to get nal short-run error correction equations. Validity of the model is checked both within the sample and out of sample cases. Results from validity study mark that the model is reasonably useful for forecasting and policy analysis.
Submission Date: 25-10-2011 4:33 PM

Effect of FDI on Economic Growth in Bangladesh and India: An Empirical Investigation
Narayan Sethi
Sanhita Sucharita
The present study examines the effect of FDI on economic growth in Bangladesh and India respectively by using the data for the period 1974-2009. The regression result indicates that FDI is positively correlated to the economic growth of Bangladesh but it has not yet been established as a significant determining factor for the economic growth. On the other hand, the result indicates that FDI is negatively correlated to the economic growth in India and it has not yet been established as a significant determining factor for the economic growth. We conclude that the effect of FDI on economic growth is ambiguous for both India and Bangladesh.
Submission Date: 05-10-2011 12:14 AM

Comparing Monetary Policy Rules in CEE Economies: A Bayesian Approach
Petre Caraiani
Using the Bayesian approach, a small open economy DSGE model was estimated for three economies from Central and Eastern Europe, Czech Republic, Hungary and Poland on a sample of quarterly data starting with 1995. The hypothesis of whether the central banks reacted to the exchange rate movements was tested using posterior odds ratio. Evidence was found that suggests that central banks reacted to the exchange rate changes. We also found evidence of similar monetary policy in the selected countries, characterized by moderate or low gradualism, as well as an active and conservative monetary policy.
Submission Date: 31-05-2011 10:46 AM

CGE Projection of Economic and Potential Environmental Effects of the Principal Trade Items between Thailand and Its FTA Partners
Sompote Kunnoot
The economic gain and shadow environmental costs of Thailand’s free trade agreements (FTAs) were projected to measure true economic gain, based on Pigou’s (1960) social welfare principle, across 180 sectors using a general equilibrium model simulation. The projection covered 50 principal export and 50 principal import items in five effective FTAs and four FTA negotiations in progress. FTAs, as a whole, were found to yield a net economic gain because true economic gain outweighed true economic loss. The results call attention to policy curbing the import of selected items from Australia, China, and the EU and to diversifying domestic production to improve economic gain from the export of selected items.
Submission Date: 04-10-2011 4:43 AM

Optimal Concentration and R&D Policies under Dual Government Goals
Daw Ma
Jiunn-Rong Chiou Chiou
The present study examines the optimal concentration and R&D subsidy/taxation policies under the dual government goals of maximizing current welfare and achieving technological superiority internationally (national champions) in an oligopolistic trading market. We find that, in order to maximize the domestic welfare, the optimal number of firms in the industry should increase in accordance with the increases in the R&D subsidies. If there are multiple firms in the domestic market, the optimal R&D policy should involve the imposition of an R&D tax and such taxation should increase as the number of firms increases. For the government to achieve its goal of seeking technological superiority, the optimal policy mix will be to increase the domestic concentration and reduce the R&D tax. When the importance of being technological superior to the government exceeds a certain level, the optimal R&D strategy will be to shift from an R&D tax to an R&D subsidy.
Submission Date: 21-09-2011 4:28 AM

Modeling the employment quality. The case of Spain
ANGEL DIAZ-CHAO
JOSE LUIS MONTES
JOAN TORRENT-SELLENS
This paper proposes a method for the construction of an objective index of job quality based on structural equation systems. The index is applied to the 17 Spanish regions. The variables were obtained from the Spanish National Institute of Statistics (INE) and their selection is based on the European Union recommendations. Results show that the fundamental variables that positively affect the quality of employment are wages, employment rate -both of the Spanish and of the EU foreigners, extra hours worked and the percentage of employed persons with higher education. While rates of temporary employment for the whole population and women, and the actual hours performed by workers in construction and services- affects negatively the quality of employment in each region. Practically all statistically significant variables have weights whose absolute standardized values range from 0.5 to 0.9, being the one with the greater influence the rate of temporality (-0.880), on the negative side, and the real wage cost (0.759) on the positive. The index results for the 17 regions shows that the region with the highest quality of employment is Madrid, followed by the Basque Country, Navarra, Catalonia and Aragon.
Submission Date: 06-07-2011 5:40 AM

On the Relationship Between Fertility and Public National Debt
Luca Spataro
Luciano Fanti
Public debt and fertility are two issues of major concern in the current debate about economic policy, especially in countries with below-replacement-fertility and large debt (which appears further enlarged as a consequence of the recent world financial distress 2008-2009). In this paper we show that public debt is in general harmful for fertility, in that debt issuing almost ever crowds out fertility. The relationship is reversed only if debt is sufficiently low and the share of capital (labor) in the economy is sufficiently low (high). Hence, our analysis would recommend that developed, capital intensive economies (such as OECD countries) aiming at a fertility recovery should reduce national debt, while developing, labor intensive economies, aiming at reducing fertility, should increase (reduce) national debt only if they are debt virtuous (vicious).
Submission Date: 19-10-2011 3:38 AM

Economic Growth and Health in India: A Panel Cointegration Assessment
Rudra P Pradhan
The paper examines the effect of health expenditure on economic growth in India at the state level during the period 1980-2010. Any such dependency would have policy implications, hence probing it could yield much value. Using cointegration technique, this study finds that health expenditure and economic growth are cointegrated in all the states of India, indicating the presence of long run equilibrium relationship between them. The Granger panel causality studied here further confirms the existence of bidirectional causality between health expenditure and economic growth, indicating existence of feedback between these two variables, both in the short run and long run. However, at the individual state level analyses, we find some diverging results and that include bidirectional, unidirectional and also no causality between health expenditure and economic growth. In conclusion, this study suggests that health expenditure should be regarded as a critical factor to help sustain economic growth in the Indian economy.
Submission Date: 15-06-2011 10:39 PM

Farm planning in nitrate sensitive agricultural areas
Christina Moulogianni
Christina Moulogianni
Thomas Bournaris
Basil Manos
Stefanos Nastis
One of the main aims of the Rural Development Plan under the EU Common Agricultural Policy is the protection of nitrate sensitive areas through Agri-environmental Schemes. This paper presents a mathematical programming model for farm planning in agricultural areas that are sensitive to nitrates. A bilevel linear programming (BLP) model is developed, that can achieve the optimal farm production plan assuming two conflicting goals: the maximization of farm gross margin and the minimization of fertilizers
Submission Date: 05-10-2011 6:18 AM

Public Investment in Agricultural and GDP Growth: Another look at the Inter-Sectoral Linkages and Policy Implications
Harish Mani
Gopalakrishnan Bhalachandran
Vishwanath Pandit
Despite its reduced share in India’s GDP, agriculture continues to have a strategic importance in ensuring its overall growth and prosperity. As part of the new economic policy package introduced in the early nineties, there has been a reduction in the rate of public investment. While this may not be bad for the industrial sector, the impact of this policy on agriculture is a matter of concern, in so far as it not only affects steady growth of agriculture but also influences the overall performance of the economy. This is more so because the agricultural sector public investment has also promoted private investment by way of what is termed as the crowding-in phenomenon. This phenomenon together with inter-sectoral linkages is used in this paper to examine the effect of higher public investment for agriculture on the stable growth of this sector as well as of the entire economy. Policy implications of this exercise are important for obvious reasons.
Submission Date: 22-07-2011 2:22 AM

The Natural Disaster Vulnerability Evaluation Model (NDVE-Model): An Application to the Northeast Japan Earthquake and Tsunami of March 2011
Mario Arturo Ruiz Estrada
Mario Arturo Ruiz Estrada
Donghyun Park
The natural disasters have a potentially large impact on economic growth but measuring their economic impact is subject to a great deal of uncertainty. The central objective of our paper is to set forth a model – the natural disasters vulnerability evaluation (NDVE) model – to evaluate the impact of natural disasters on GDP growth. The model is based on three basic indicators - (i) the natural disasters vulnerability propensity rate (Ω); (ii) the natural disaster devastation magnitude rate (Π); and (iii) economic desgrowth rate (δ). In addition, this model is based on chaos theory and risk complexity analysis framework. We apply the NDVE-Model to the Northeast Japan earthquake and tsunami of March 2011 to evaluate its impact on the Japanese economy.
Submission Date: 28-08-2011 9:58 PM

Using Prediction Markets to Guide Global Warming Policy
Aaron Jackson
Scott Sumner
There is currently great uncertainty about both the likely severity of global warming, and the most cost effective policies for dealing with the problem. We argue that suitably designed prediction markets can reduce some of the uncertainties surrounding this difficult issue, and thus assist in the policymaking process. Because future policymakers will be better placed to see the scale of the problem and feasibility of proposed solutions, policymakers today could benefit from current market forecasts of future global temperatures and atmospheric greenhouse gas levels. This would better allow policymakers to direct resources more effectively in the near term and the long term to address the global warming problem.
Submission Date: 28-12-2010 10:06 AM

Multi-project discount rates for energy technology policies: A formal example on Combined Heat and Power
Jacopo Torriti
This paper introduces multi-project discount rates with a view to include multiple project performances in energy technology policies. The case of Combined Heat and Power (CHP) is presented to formally demonstrate that multi-project weights could be applied when setting discount rates for energy policies. It is concluded that while uncertainty around the performance of both CHP and other energy technologies might affect measurements of risk and estimated available budget for future re-investment, it is possible to determine multi-project weighted discount rates by following a reversed intertemporal approach of applied general equilibrium.
Submission Date: 02-06-2011 4:47 AM

Determinants and projections of demand for higher education in Portugal
Isabel Vieira
Carlos Vieira
This paper formulates a model of demand for higher education in Portugal considering a wide range of demographic, economic, social and institutional explanatory variables. The estimation results suggest that the number of applicants reacts positively to demographic trends, graduation rates at secondary education, female participation, compulsory schooling and the recent Bologna process. Demand reacts negatively to the existence of tuition fees and to unemployment rates. Within an adverse demographic and economic context, forecasts of demand for the next two decades suggest the need to increase participation rates, to avoid funding problems in the higher education system and increase long-term economic development prospects.
Submission Date: 08-06-2011 10:11 AM

INTEREST RATE LIBERALISATION AND ECONOMIC GROWTH IN NIGERIA: EVIDENCE BASED ON ARDL-BOUNDS TESTING APPROACH
Erasmus Owusu
Nicholas Odhiambo
The paper examines the relationship between interest rate liberalisation policies and sustainable economic growth in Nigeria. Employing autoregressive distributed lag (ARDL) - bounds testing approach and using GDP per capita as growth indicator, the paper establishes a long run relationship between economic growth and interest rate liberalisation which is represented by an index calculated using principal component analysis (PCA). The paper finds that in the long run, interest rate liberalisation policies have positive effect on economic growth in Nigeria. This supports the numerous past studies which have reported positive results regarding the effects of interest rate liberalisation on economic growth. The paper concludes that interest rate liberalisation polices together with increase in the productivity of labour, increase in capital stock and increase in foreign direct investments determine economic growth in Nigeria.
Submission Date: 03-08-2011 9:42 AM

HOW DOES A FISCAL REFORM AFFECT ELASTICITIES OF INCOME TAX REVENUES? THE CASE OF SPAIN, 2003-2008
Diego Martinez-Lopez
This paper estimates the extent to which an exogenous change in income affects income tax revenues. We focus on the case of Spain over the period 2003-2008, as income tax there underwent a substantial reform in 2007. Using both an analytical method and a numerical simulation, we find a significant increase in aggregate income tax elasticities from 1.4 for 2003-2003 to around 1.8 for 2007-2008. The sensitivity of results to the presence of housing tax credits, non-equiproportional variations in income, changes in income inequality and fiscal drag is also considered.
Submission Date: 22-03-2011 4:52 AM

Does International Trade Induce or Deter Debt Repayment Capacity of Developing Countries? : Looking through the Lens of the US Subprime Crisis
INDRANARAIN RAMLALL
This paper develops a credit risk model that focuses on the repayment capacity of developing countries in the world with specific focus given to international trade. The research is not only innovative but also timely in terms of policy implications chiefly following the adverse effects of the US subprime crisis on the debt states of countries in the world. Should international trade be wealth-promoting for developing countries, then, there will be added incentives for them to foster trade. Otherwise, this would be symptomatic to international trade being mere resource misallocations with poor sustainable policies in the long-term. A pooled estimation approach is employed to disentangle the adverse effects of the world’s worst financial/economic/debt crisis on the repayment capacity of the developing countries. Results show that international trade has been particularly stimulating during the pre crisis periods with a positive effect noted on their debt repayment capacity. However, post the crisis, no such effects prevail. Such a finding adds significant momentum to the fact that the crisis may already be curbing growth prospects via the trade channel for the developing countries with potential rekindling effects on protectionism. Above all, the impotency of international trade metrics on repayment capacity coupled with a highly negative pronounced effect of external debt on the same repayment capacity, both during the crisis period, add up strong evidence of a crisis-induced external debt overhang.
Submission Date: 28-12-2011 9:02 AM

A characterization of the environmental Kuznets curve: The role of the elasticity of substitution
Roberto Pasten
Eugenio Figueroa
This paper analyzes social preferences consistent with an environmental Kuznets curve (EKC), presenting a closed form of a social welfare function of market and non-market goods and services whose maximization outcome is an optimal income-pollution path exhibiting the characteristic shape of an EKC. The turning point predicted by the model depends on the elasticity of substitution between consumption and environmental quality determined by preferences; the harmfulness of pollution; the degree of substitution between capital and pollution in production; and the fact that preferences are properly and adequately translated into explicit market prices and implicit shadow prices by the social decision-making process. We show that this preference characterization of the EKC is a general case encompassing certain special cases described in earlier characterizations of the EKC, and analyze how the elasticity of substitution between consumption and environmental quality determined by preferences plays a key role
Submission Date: 03-03-2011 6:03 AM

Government policy and the minimization of the social loss function
Nissim Ben David
The social loss function used in the paper is quadratic in deviations of actual from optimal values of the objectives. In order to activate an optimal policy suggested in this paper, the planner should estimate an econometric system of equations that relate between the values of exogenous policy variables and targeted endogenous variables. Minimizing social loss, subject to estimated equations constraints, the policy planner can determine the optimal level of policy exogenous variables. Assuming a policy planner in the U.S. is trying to minimize social damage, I estimated the optimal policy of relevant exogenous variables, according to the suggested model.
Submission Date: 25-05-2011 2:53 PM

Structural Fiscal Rule: A Proposal for Mexico
Alfredo Coutino
Due to the absence of a fiscal reform that increases tax revenues significantly in the near future, Mexico needs to adopt a structural correction in its public finance through the implementation of a rule. This correction will eliminate budget volatility and will give fiscal policy more countercyclical power. Since the structural rule will promote fiscal certainty, the country will reinforce investors\\\' confidence and will strengthen public finances. The rule does not substitute the fiscal reform needed, but it makes the reform less urgent since it introduces a structural discipline in the government expenditure, which also makes the budgeting process more efficient. This paper proposes and evaluates the implementation of such a fiscal rule to the case of Mexico.
Submission Date: 14-10-2011 11:28 AM

Non-scale endogenous growth effects of environmental policies
Oscar Afonso
We build a general equilibrium endogenous growth model in which final goods are produced either in the skilled-labour intensive Clean sector or in the unskilled-labour intensive Unclean sector. In particular, by solving transitional dynamics numerically towards the unique and stable steady state, environmental policies encourage scale-invariant technological-knowledge bias. This, in turn, promotes environmental quality, the skill premium and economic growth.
Submission Date: 20-05-2011 7:44 AM

Industry Characteristics and FDI Induced Technology Spillovers
Akinori Tomohara
While the literature has explored the relationship between FDI and productivity, a consensus has yet to be reached regarding FDI’s impacts on the productivity of local companies, specifically with respect to vertical spillovers. Motivated by various results in the literature, this paper specifies the conditions under which industries enjoy horizontal, backward, or forward technology spillovers. Our analysis extends upon previous works and sheds light on the necessity of distinguishing industry characteristics when discussing potential benefits from FDI. The results of the analysis show that export-oriented sectors enjoy a higher degree of technology spillover than domestic-market oriented sectors do. Taken together with historical evidence, the results imply that a host government might benefit by attracting FDI into export-oriented industries to attain the goal of long-run economic growth.
Submission Date: 24-04-2011 8:35 PM

Rule of law and policy-induced environmental technology adoption
Davide Infante
Janna Smirnova
The implementation of environmental technologies almost always complies with regulation that is interdependent with the strength of the rule of law. We develop a model demonstrating that when the rule of law is reinforced, pollution abatement standard is more efficiently established and leads to the more successful adoption of environmentally friendly technologies. We show that a more stringent rule of law contributes to the achievement of second best allocation with less resource drainage caused by rent-seeking and with lower costs of regulatory intervention. The model sheds new light on implementation of environmental policies in a reinforcing institutional context of developing economies.
Submission Date: 11-03-2011 2:08 AM

CGE Accounting of Economic and Potential Environmental Effects of the Principal Trade Items between Thailand and Its FTA Partners
Sompote Kunnoot
Economic gain and shadow environmental costs of Thailand’s FTA were projected to measure true economic gain based on Pigou’s social welfare principle through 180 sectors general equilibrium model simulation. The projection covered 50 principal export and 50 import items in five effective FTAs and four FTAs negotiation in-progress. FTAs as a whole was found to yield net economic gain, as true economic gain outweighed true economic loss. Results raised policy attention to curb import of selected items from Australia, China, and EU, and to develop diversification of domestic production to improve economic gain from export of selected items.
Submission Date: 07-06-2011 5:18 AM

Finance and growth: Schumpeter might be wrong in our era. New evidence from Meta-analysis
Simplice A. Asongu
This paper seeks to bridge the gap between Schumpeterian authors and sympathizers of Andersen and Tarp (2003). As far as we have perused, the absence of a meta-study in the finance-growth nexus literature is an important missing link. Methodically narrowing down from 186 papers to a summary of 20 studies with 197 outcomes, we use 20 comparison criteria to evaluate which factors have influenced the phenomenon over the past decades. Using dynamics of financial depth and financial activity, our meta-findings provide support for Andersen and Tarp (2003) in concluding that contrary to Schumpeterian authors, the positive link between finance and growth has not been sufficiently sustained by recent empirical works. The frequency of financial crisis that inhibit the finance-led-growth nexus is more preponderant in our era than it was in the days of Schumpeter. The study also accounts for the presence of publication bias in the literature which further vindicates an anti-Schumpeterian thesis.
Submission Date: 23-08-2011 3:53 PM

THE ROLE OF EDUCATION IN ECONOMIC GROWTH
Arusha Cooray
This study examines the effect of the quantity and quality of education on economic growth. Using a number of proxy variables for the quantity and quality of education in a cross section of low and medium income countries, this study finds that education quantity when measured by enrolment ratios, unambiguously influences economic growth. The effect of government expenditure on economic growth is largely indirect through its impact on improved education quality.
Submission Date: 18-04-2011 11:42 PM

Taiwan’s trading arrangements and industrial location
I-JU TSAI
Kenneth S. Lin
A New Economic Geography model is used to assess the impacts of trading arrangements on industrial development in Taiwan, a small economy. Addressing a trading system with three regions—the small economy, the large economy (referring to mainland China), and the global market—the simulation results show that, without reducing the trade costs between the small economy and the global market and if the small and the large economy are integrated, the small economy will become a deindustrialized periphery. In contrast, if the trade costs between the small economy and the global market are reduced low enough—either by the small economy\\\'s adopting a global-market priority trading arrangement or by its serving as a hub—agglomeration of industry takes place in the small economy.
Submission Date: 20-05-2011 9:27 PM

ECONOMIC GROWTH AND FOREIGN DIRECT INVESTMENT IN MALAYSIA: EVIDENCE FROM EMPIRICAL TESTING
Mori Kogid
Jaratin Lily
Rozilee Asid
Dullah Mulok
Nanthakumar Loganathan
This study attempts to investigate the crucial relationship between FDI and economic growth in Malaysia for the period of 1971 to 2009 by considering the FDI net flows as an indicator for FDI growth. Using the Johansen and VECM approach in analyzing this relationship, the empirical results showed the existence of a long-run cointegration relationship between the FDI and the RGDP. In addition, a causal effect exists running from the FDI to the RGDP implying that FDI does influence economic growth. Therefore this study proposes the importance of inward FDI as a paramount factor to accelerate the economic development of a country, especially Malaysia, and could be taken as one of the key factors to stimulate the economy and for future economic development policy.
Submission Date: 24-05-2011 7:14 PM

Does Armey Curve Exist in OECD Economies? A Panel Threshold Approach
younes nademi
Esmaiel Abounoori
Haniye Sedaghat Kalmarzi
We apply modified Ram (1986) model by Chen and Lee(2005) to estimate the threshold regression model for OECD countries, concerning the effect of government size on economic growth. The results show a non-linear relationship of the Armey curve in OECD countries, in which the threshold effect corresponding to final government expenditure share in GDP of about 20%.
Submission Date: 20-08-2011 7:19 AM

TOP Tax system - A new taxation system
VIJAYA VARMA
I am suggesting new methods, models, and innovative and alternative policies in the areas of public finance, optimal taxation, tax collection, budget preparation, subsidies, money supply, and banking financial system to help remove corruption, tax evasion, economic recession, black money, fake currency and societal inequalities. In my opinion, the proposed TOP Tax system may usher in good governance, 100% tax compliance and corruption free environment. It suggests a single tax called
Submission Date: 18-02-2011 10:08 PM

Exchange Rate Sensitivity of Mexican Maize Imports from the United States: A Cointegration Analysis
Rakhal Sarker
Jose Luis Jaramillo-Villanueva
Since the implementation of the NAFTA in 1994, agri-food trade between Mexico and the United States grew substantially. While some analysts argue that NAFTA has contributed the most to the dramatic expansion of this trade, others emphasized the role played by exchange rate in this process. An attempt is made in this paper to address this issue by determining the extent to which NAFTA, expansion of the livestock sector, changes in exchange rate and exchange rate variability have contributed to the expansion of Mexican maize imports from the United States from January 1989 to December 2004. The results from cointegration analysis demonstrate that changes in exchange rate, per capita income in Mexico and livestock inventory all have significant positive effects on Mexican maize imports from the United States in the long-run. In the short-run, however, NAFTA has been the most important driver of maize imports by Mexico from the United States.
Submission Date: 10-05-2011 12:48 PM

Financial Market Liberalization, Monetary Policy, and Housing Sector Dynamics
Rangan Gupta
Marius Jurgilas
Stephen Miller
Dylan van Wyk
This paper considers how monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector and whether the financial market liberalization of the early 1980’s influenced those dynamics. The analysis uses impulse response functions obtained from a large-scale Bayesian vector autoregressive model at the national and four census regions. Overall, the 100 basis point Federal funds rate shock produces larger effects on the real house prices, both at the regional level and the national level, in the post-liberalization period when compared to the pre-liberalization era. While the precision of the estimates do not imply significant differences, the finding does offer a caution. That is, the housing market appears more sensitive to monetary policy shocks in the post-liberalization period. Thus, the monetary authorities may need to exercise more care in implementing Federal funds rate adjustments going forward. Finally, we find that the reaction of housing sector proves heterogeneous across regions.
Submission Date: 19-05-2011 2:51 AM

Long-Run Determinants of Housing Price in India
Mantu Kumar Mahalik
The study empirically examines key determinants of housing price in the Indian dwellings market. Employing cointegration and VAR models, estimates from the former show that in long-run, it is the real per capita income which is a potential source of demand has the most dominant positive influence on housing prices while real BSE index, real effective exchange rate and real non-food bank credit surprisingly have adverse influences. The variance decomposition results of VAR suggest that besides its own disturbance explaining significant proportion of variation in housing prices, supply side factor (bank-credit) accounts for major variation while demand factors contribute marginally.
Submission Date: 10-08-2011 11:17 AM

Monetary Policy and Credit Demand in India and Some EMEs
Bansi Lal Pandit
Pankaj Vashisht
Impact of changes in policy rate of interest on demand for bank credit is examined for seven emerging market economies including India for the period 2002 to 2010.Panel data techniques are used after ruling out the presence of unit roots. The results show that when other determinants, like domestic demand pressure, export demand and impact of stock market signals are controlled for, change in policy rate of interest is an important determinant of firms’ demand for bank credit. The results confirm that monetary policy is an important countercyclical tool for setting the pace of economic activity.
Submission Date: 10-05-2011 4:51 AM

An Estimated Dynamic Stochastic General Equilibrium Model for Estonia
Paolo Gelain
Dmitry Kulikov
This paper reports an estimated open economy dynamic stochastic general equilibrium model for Estonia. The model is designed to highlight the main driving forces behind the Estonian business cycle and to understand how the euro area economic shocks and its monetary policy affect the small open economy of Estonia. It is a two-area DSGE model incorporating New Keynesian features such as nominal price and wage rigidity, variable capital utilization, investment adjustment costs, as well as other “typical” features — both for the domestic and euro area part of the model. It is rich in structural shocks such as technology, consumption preference, mark-up, etc. The model is estimated by Bayesian techniques using a quarterly data sample that covers main macroeconomic aggregates of Estonia and the euro area
Submission Date: 18-05-2011 3:37 AM

Penalty mechanism design
Pu-yan NIE
Penalty is a crucial approach to maintain society in order in both legal and political philosophy. How to establish rational and efficient penalty is exceedingly important in practice in economics and politics and this paper explores the optimal mechanism design of the penalty. The penalty mechanism design theory under the monopoly is established and developed in this work. By establishing the penalty mechanism design model, this paper finds that stricter punishment can efficiently deter violation of the regulation and can decrease the profits of the monopolization. Furthermore, penalty can improve concavity such that it is easy to make decision for the firm and the strict penalty results in the optimal decision. We also show that punishment is in general costly, which is highly consistent with the phenomena in practice.
Submission Date: 20-04-2011 7:49 PM

Multiple Reserve Requirements and Equilibrium Dynamics in a Small Open Economy
Wen-Yao Wang
Paula Hernandez-Verme
We modeled a typical Asian-crisis-economy using dynamic general equilibrium techniques and established exchange rates from nontrivial fiat-currency demands. The scope for existence of equilibria and dynamic properties are associated with the underlying policy regime. Binding multiple reserve requirements promotes stability under a floating exchange rate regime while backing the money supply acts as a stabilizer in a fixed regime.
Submission Date: 01-03-2011 8:35 AM

Foreign Central Bank Conservativeness and Unionized Wage Setting
Attila Korpos
The design features of central banks have international significance due to their impact on other countries. Domestically, a more conservative central bank generates a tighter policy, which reduces inflation fears, but meanwhile, it increases unemployment fears for labor unions (due to the trade-off along the Phillips curve). Therefore, domestic conservativeness has an ambiguous effect on real wage claims. This paper shows that a foreign central bank\\\\\\\'s conservativeness differs in impact, as it reduces both types of fears, and hence, it always deters real wage claims. Therefore, the home country has a clear interest in the design of an ultra-conservative or strictly inflation targeting foreign central bank.
Submission Date: 02-03-2011 2:35 PM

How responsive are real exchange rates in developing countries to terms of trade shocks?
Lavan Mahadeva
Juan Carlos Parra Alvarez
In developing countries, policy assessments about the reaction of the domestic economy to external shocks depend on the degree of substitution between domestic and imported items. We estimate these key parameters for Colombia. We find that the input of the distribution sector in transforming imports is complementary, implying a great potential sensitivity of the Colombian economy to external shocks. However we also find that consumption imports at the point of sale are substitutes with domestic items. Even though the distribution sector is smaller, its influence may dominate because the responsiveness of the real exchange rate is highly nonlinear in the elasticity.
Submission Date: 07-03-2011 2:46 PM

The Credit Risk Management and Business Operation Decision of Automobile Loan for Bank
Tyrone T. Lin
Chia-Chi Lee
You-Jie Lin
This paper explores the influences of the approved results of loans cases, the borrower??s attributes, and the relationship between the borrower and the case bank on the overdue risks of automobile loans. The results can improve the credit quality and avoid the misjudgment of screening automobile loan customers and also establish a better automobile loan risk management forecasting model. Besides, the case bank has to identify and develop high-quality loan customers with different types of automobile loan products and provide them with exclusively customized services so as to acquire a balance between the risk management and loan business operation decision of the case bank.
Submission Date: 20-12-2010 3:53 AM

Simple Price-Level-Targeting versus Inflation-Targeting Monetary Policy Rules under Model Uncertainty
Sebastian Schmidt
This paper compares the performance and robustness of simple price-level-targeting (PLT) and inflation-targeting (IT) monetary policy rules in three non-nested models of the euro area. Taking advantage of the expectations channel, PLT outperforms IT in two out of the three models. However, the quantitative difference in the stabilization performance of the two types of policy rules is generally small. Optimal model-specific rules of both classes are not robust to model uncertainty but by taking a Bayesian policy approach it is possible to identify rules that perform well across all three models. While the Bayesian PLT and IT rules exhibit similar stabilization outcomes, minor perturbations in the policy parameters can lead to indeterminacy under IT.
Submission Date: 10-03-2011 5:23 AM

The Internal-External Debt Ratio and Economic Growth
Tilemahos Efthimiadis
Tsintzos Panagiotis
In this paper we examine the effects of the ratio of internal to external public debt on a country’s economic growth. These effects are examined through a competitive, decentralized model of endogenous economic growth, which relies on public investments. Our findings show that as the internal-external public debt ratio increases, the public to private capital ratio increases which in turn positively affects the long run economic growth rate. The main conclusion of this paper is that the outflow of domestic capital which is needed to service external debt has unfavorable repercussions on an economy’s long run steady state growth rate.
Submission Date: 03-02-2011 11:30 AM

A Trend Deduction Model of Fluctuating Oil Prices
ZhongXiang Zhang
Haiyan Xu
Crude oil prices have been fluctuating over time and by a large range. It is the disorganization of oil price series that makes it difficult to deduce the changing trends of oil prices in the middle- and long-terms and predict their price levels in the short-term. Following a price-state classification and state transition analysis of changing oil prices from January 2004 to April 2010, this paper first verifies that the observed crude oil price series during the soaring period follow a Markov Chain. Next, the paper deduces the changing trends of oil prices by the limit probability of a Markov Chain. We then undertake a probability distribution analysis and find that the oil price series have a log-normality distribution. On this basis, we integrate the two models to deduce the changing trends of oil prices from the short-term to the middle- and long-terms, thus making our deduction academically sound. Our results match the actual changing trends of oil prices, and show the possibility of re-emerging soaring oil prices.
Submission Date: 02-03-2011 4:03 PM

Effects of Monetary Policy Coordination on Small Open Economies
Nilufer Ozdemir
This paper proposes an innovative approach for analyzing the influence of external shocks on small open economies. This approach has two new features: First, it incorporates the role of large-country monetary policy coordination in influencing shocks. Second, it categorizes types of external effects into two. The direct effects are propagated by international market surprises. The indirect effects are the shocks which pass through another country before reaching the small open economy. Simulation results show that indirect effects are significantly large and their size depends on where the shock originated from and on the policy coordination regime followed by large countries.
Submission Date: 25-02-2011 9:38 AM

Structural heterogeneity and partial budgetary cooperation in a monetary union
S MENGUY
The paper analyzes the usefulness of the budgetary cooperation in a monetary union, even if it is limited to a subgroup of countries with close structural characteristics. We find that its advantages depend on the nature of the shocks and on the width of the heterogeneities within the monetary union. The budgetary cooperation, between countries where the sensibilities of the economic activity to the public expenditures and to the foreign economic activity are sufficiently high, is beneficial to stabilize symmetrical demand shocks. It is beneficial to stabilize symmetrical supply shocks if it concerns a sufficiently large number of countries. On the contrary, the budgetary cooperation is generally detrimental to stabilize asymmetrical demand or supply shocks.
Submission Date: 14-10-2010 9:20 AM

Causality between Prices, Output and Money in India:An Empirical Investigation in the Frequency Domain
Abodh Kumar
Neeraj Hatekar
Ashutosh Sharma
The causation between output and prices has been intensively investigated in the Indian context. Decomposing the money-output causality by frequency is likely to be highly revealing about the underlying macroeconomic processes. In this paper, we examine this issue using a bivariate methodology developed by Lemmens et al. (2008) in order to decompose Granger causality between money supply, prices and output in the frequency-domain. The evidence suggests that money supply granger causes output over the short-run, but over the business cycle frequencies and in the long run, money supply Granger causes prices, not output.
Submission Date: 10-02-2011 10:03 AM

Solution of Stock Flow Consistent Macroeconomic Models Via the Gauss Seidel Algorithm
Stephen Kinsella
This paper builds and solves a stock flow consistent model in the tradition of Godley and Lavoie (2007). The goal of this paper is to develop a benchmark model that is both thorough and flexible enough to be applied to modern industrialized economies to aid monetary and fiscal policy decisions. The main difficulty with stock-flow consistent models is the complexity of the models and their solutions. To reduce the complexity of the solution of each model, an algorithm is developed using the Gauss-Seidel method. This algorithm is successful in solving the expansive linear system of equations representing our economy. Given our choice of parameters, our benchmark model achieves a steady state with an inflation rate of 2%, whilst maintaining full employment.
Submission Date: 16-12-2010 4:18 PM

Capital accumulation and TFP growth in the EU:a production-frontier approach
Mª del Mar Salinas-Jiménez

Submission Date: 31-12-1969 6:00 PM

The Transitional Costs to Trade Liberalization: An Intertemporal General Equilibrium Model for Egypt
Abeer Elshennawy
Empirical studies of trade liberalization indicates that economies can experience adjustment costs during the course of trade liberalization. A leading World Bank study reveal that transitional costs are basically manifested in falling output, increasing pressure on the balance of payment and rising unemployment.Utilizing an Intertemporal General Equilibrium Model for the Egyptian Economy, this paper investigates the impact of trade liberalization on adjustment costs and assess the costs and benefits of a number of commonly prescribed adjustment policies including gradual reduction of tariffs, export and investment subsidies. The results of the model show that despite the low level of tariffs already existing, pressure on the balance of payment intensifies following trade liberalization
Submission Date: 02-03-2011 2:00 PM

Wage-Productivity Differentials and Indian Economic Efficiency
Amarendra Sahoo
Amarendra Sahoo
Thijs tenRaa
A frontier-general equilibrium analysis with skill transformation evaluates the productivities of skilled and unskilled labour and potential of the Indian economy. We compare the wages of skilled and unskilled labour between 1994 and 2002 with their respective productivities over this period. Education is considered to be responsible for the skill formation over this period: the change in skilled labour supply is endogenous in the model. Compared to its productivity, skilled labour is underpaid in the initial period and overpaid in the second period. Unskilled labour is underpaid in both periods. A decomposition exercise shows that skilled labour gains from free trade, and stands to lose due to education and domestic competition in the second period. The annualized rate of return to education is between 7 and 10 percent. The economy operates below its potential in both periods, particularly in the second—due to trade limitations and the failure to capture the return to education.
Submission Date: 07-12-2010 3:57 AM

An empirical analysis of the determinants of the labor force participation rate in Puerto Rico
harri ramcharran
This research empirically estimates the determinants of the labor force participation rate in Puerto Rico for the period 1987-2008. The estimated results indicate statistically significant coefficients for the variables real wages (labor income) and transfer payments (non-labor income). The implication of values of these coefficients is that transfer payment considerations are more important than labor income in determining labor supply choice and thus the LFPR. The variables indicating job opportunities and US- Puerto Rico economic linkage are not significant. Policies aimed at reforming the transfer payment mechanism to provide incentives to work are highly recommended. JEL classification: J21, J22.
Submission Date: 21-11-2010 12:15 PM

Supplementary Pension Insurance in Slovenia: An Analysis with an Overlapping-generations General Equilibrium Model
Miroslav Verbic
The article presents an analysis of supplementary pension insurance in Slovenia and its subsequent effects on welfare, macroeconomic variables and pension fund deficit with a dynamic OLG general equilibrium model. It has been established that the volume of supplementary pension saving is insufficient at present in Slovenia to compensate the deterioration of rights from the first pension pillar. Not only is the participation in the (voluntary) second pillar insufficient, but especially the premia are too low. The macro-economic consequences of introducing a fully-funded mandatory component of pension insurance would not be unfavourable. Increased pension saving reduces current consumption and increases the labour supply of active generations, but also increases the volume of disposable savings, so the increased investment may increase capital stock and production, which leads to an increase in economic growth and potential future consumption. Increased labour supply of insured persons would also lead to a higher volume of contributions for mandatory pension insurance, which would reduce the state pension fund deficit.
Submission Date: 29-01-2008 12:00 AM

The Poverty-Growth-Inequality Triangle Hypothesis: An Empirical Examination
Abbas P. Grammy
Abstract: This paper is motivated by empirical observations on the interaction between distribution and growth in reducing absolute poverty. Using data on sixty-six developing countries over the periods 1970-1979, 1980-1989 and 1990-1998, we find that improvement in income distribution is the key channel for poverty reduction. In addition, growth accompanied by improved distribution works better than growth and distribution alone, and that provision of civil liberties and political rights enable people to more actively participate in reducing poverty.
Submission Date: 31-12-1969 6:00 PM

Is a real monetary condietions index an important indicator for monetary policy in Malaysia
Wai-Ching Poon

Submission Date: 27-01-2007 12:00 AM

Convergence clubs: geography and technology
Judith Tomkins
Alexiadis
NA
NA
This paper investigates the extent of convergence amongst the 51 prefectures of Greece during the time period 1970-2000. The main objectives are to discover whether there is a convergence club amongst the regions, to establish whether there is a spatial pattern to club membership, to assess the impact of agglomeration effects and regional capacities to innovate or adopt technology and finally, to analyse the characteristics of convergence club members. The results suggest that there is a significant spatial dimension to regional growth and that members of the convergence club are not only in close spatial proximity but also share other characteristics in common. The analysis is also shown to have important implications for the direction of regional policy in Greece.
Submission Date: 25-09-2006 12:00 AM

Modeling Meat Supply Response under Rational Expectations and CAP Reforms: An Application to the Greek Sheep Industry
Anthony Rezitis

Submission Date: 29-08-2007 12:00 AM

Welfare Effects of VAT Reforms: a general equilibrium analysis
Brita Bye
Str?m/Birger
?vitsland/Turid
Indirect taxes such as value added taxes (VAT) generate a substantial part of tax revenue in many countries. In practise VAT systems are often characterised by exemptions, reduced rates and zero ratings. A non-uniform VAT system may generate an efficiency loss and encourage rent-seeking and tax fraud activities. It also has high administrative costs. We compare two different non-uniform VAT systems exemplified by the former and current Norwegian VAT systems, with a general and uniform VAT system. Our analysis shows that an imperfect extension of the VAT system to cover more services is welfare inferior to the baseline non-uniform VAT system only covering goods. However a general and uniform VAT system is welfare superior to both the non-uniform systems.
Submission Date: 15-08-2008 12:00 AM

Optimal fiscal and tax policies in a general equilibrium model of growth
George Economides
Vassilatos Vangelis
This paper continues the study of optimal second-best economic policy in a growing general equilibrium economy. It considers the case in which a benevolent Ramsey-type government chooses optimally the income tax rate, as well as the allocation of the collected tax revenue among public consumption services, public investment and transfer payments. It then studies the properties of the chosen policies and their implications for the macro economy.
Submission Date: 02-04-2008 12:00 AM

Optimal Monetary Policy for a Small Open Economy
Jose Angelo Divino
This paper focuses on the design of monetary policy rules for a small open economy. The model features optimizing behavior, general equilibrium and price stickiness. The real exchange rate is shown to affect the firm?s real marginal cost, aggregate supply and aggregate demand. The welfare objective depends on the openness of the economy, and the optimal policy rule differs from that which obtains in a closed economy. The inflation versus output gap stabilization trade-off is caused by the real exchange rate. The implied optimal monetary policy regime is domestic inflation target coupled with controlled floating of the real exchange rate.
Submission Date: 02-04-2008 12:00 AM

Interactions between Finance and Growth
Shu-Chin Lin
Huang, Ho-Chuan (River)
Suen, Yu-Bo
Efforts devoted to estimating the effects of financial development on a nation\'s long-run economic growth have been hampered by the failure to account for the endogeneity of financial development. This paper employs a simultaneous equations model to tackle the reverse causation and endogeneity bias in the finance-growth nexus. The identification and estimation of the structural parameters of interest can be easily achieved by following the novel approach of Lewbel (2006). Using a broad cross-country data over the 1960-1995 period, we find strong evidence of simultaneity between financial intermediary development and economic growth, and the direction of causality runs both from finance to growth and in the opposite direction from growth to finance. That is, better functioning financial intermediaries foster economic growth, and faster rates of growth have beneficial impacts on the development of intermediation.
Submission Date: 29-08-2007 12:00 AM

Consumption in urban China and monetary policy: evidence from the 1990s
Per-Ola Maneschiold
This study utilizes cointegration theory and error-correction models to estimate a dynamic consumption function for urban China by use of monthly data for the 1990s. The error-correction model reveals a long-run relationship between real consumption, real disposable income, the short-term interest rate and inflation. A structural break is located to September 1996 indicating that inflation is in relative terms more important to the consumption decision in the post-break period still with income as the most important variable. As inflation seems to be more relevant to household consumption decisions in urban China than the nominal interest rate, the policy variable for the People?s bank of China, a strict inflation target for the central bank might increase the effectiveness in monitoring consumption.
Submission Date: 31-12-1969 6:00 PM

Does the internet Stimulate Inward Foreign Direct Investment?
Changkyu Choi
This paper studies the effect of the Internet on the volume of inward foreign direct investment (FDI). The Internet is assumed to induce more FDI by improving productivity. Using bilateral FDI data from 14 source countries and 53 host countries, cross-country empirical regressions based on a gravity FDI equation are performed. We found by ordinary least-squares and weighted least-squares analysis that when the number of the Internet hosts or users in a host country increased by 10%, FDI inflows increased by more than 2%.
Submission Date: 21-10-2001 12:00 AM

New Economy and Dollar Puzzle
Neil Karunaratne

Submission Date: 25-11-2001 12:00 AM

Manuscript submission for publication in the Journal of Policy Modeling
Edward Ghartey




Submission Date: 09-03-2009 12:00 AM

Exports and productivity in a small open economy: A Causal Analysis of Aggregate Norwegian Data
Erik Nesset
The direct link from growth in productivity - the export-led growth hypothesis - is analysed using aggregeted Norwegian quarterly time series from 1968 to 1992. By applying techniques of multivariate cointegration, a statistical congruent vector autoregression (VAR) model serves as a general point of departure for structural testing and identification of causal links. The results show that labour productivity can be regarded as \
Submission Date: 28-05-2002 12:00 AM

Investment, Markup and Capacity Utilization in Tunisia
Riadh Ben Jelili

Submission Date: 28-05-2002 12:00 AM

Growth, Employment and Wage Formation
Valeri Sorolla
Raurich, Xavier
We develop an endogenous growth model with a non-competitive labor market characterized by a monopoly union in order to study the relation between growth and employment. We show that if there is wage inertia, economic growth positively affects employment in the long run. We also use the model to analyze the effects on employment and growth of increasing public capital.
Submission Date: 09-06-2004 12:00 AM

Implicit Government Guarantees, Debt Maturity, and the Efficiency of Debt Markets
Yehning Chen
This paper studies how implicit government guarantees affect firms¡¦ debt maturity choices and the efficiency of debt markets. It is found that a firm whose debts are implicitly guaranteed by the government will prefer short-term debt financing if the profitability of its investment project is volatile or if the government¡¦s policy on providing implicit debt guarantees is stable. It is also found that implicit government guarantees may induce debt issuers to prefer a less efficient debt market. These results imply that implicit government guarantees may increase rather than decrease the chance of a financial crisis.
Submission Date: 06-09-2004 12:00 AM

Financial Development and Money Demand in Tunisia
Adel Boughrara

Submission Date: 09-02-2002 12:00 AM

Welfare and Distributional Impact of Financial Liberalization in Nepal
Keshab Bhattarai
From analyses of results from a dynamic CGE model of Nepal we argue that by equalizing rates of return across sectors financial liberalization improves efficiency and brings more equal distribution of income. Rural households gain more than urban households from liberalised financial markets over time.
Submission Date: 10-02-2002 12:00 AM

Seeking Information: The Role of Information Providers in the Policy Decision Process
Otto H. Swank
The consequences of many policies are complicated and difficult to foresee. Those who are capable of providing information to policy makers often have a vested interest in the outcomes. This gives them an incentive to distort information to manipulate policy decisions. In this article we argue that reputation or penalties for lying do not always induce information providers to tell the truth. Rather than relying on interested parties, policy makers can create public agencies to collect information about policy consequences. This has the advantage that policy makers can affect the preferences of the information provider. The drawback is that public agencies must exert efforts to collect information. We argue that policy makers create public agencies whose preferences deviates from their own preferences.
Submission Date: 01-04-2002 12:00 AM

Systematic risk in a mature, export oriented industry in a small open economy: The Canadian forestry industry
Perry Sadorsky
Henriques, Irene
Changing conditions in the domestic and global economic environment, and at the industry level can impact a company\'s systematic (market) risk. Changing systematic risk can, in turn, impact a firm\'s current business performance and its future strategic options. This is particularly true of a mature, export oriented industry located in a small open economy. This paper investigates the determinants of systematic risk in the Canadian forestry industry. Daily data are used to estimate quarterly market betas. Although the average firm market beta is 0.62, the quarterly market betas show some variation across both time and cross-section. The results indicate that forest product commodity prices, the term premium, the exchange rate between the Canadian and the American dollar, and firm market value are each statistically significant determinants of systematic risk in the Canadian forestry industry. This paper shows that the financial markets take these factors into account when determining systematic risk. These results are useful for managers, planners, policy makers, and investors who are interested in the Canadian forestry industry.
Submission Date: 03-04-2002 12:00 AM

Effects of Trade Liberalization on Domestic Prices: The Evidence From Korea, 1983-1995
Yung Yang
Min Hwang
This paper presents estimates of the competitive effect of trade liberalizationi on the domestic pricing behavior of Korean manufacturing, utilizing panel data for 18 manufacturing sectors at the 3 digit SIC level over five 3-year periods during 1983-1995. The theoretical framework is based on an oligopolistic model of price determination in an open econmy. Our results indicate that there was a restraining effect from import competition on domestic prices in Korea. One implication is that trade policy should be viewed as another viable policy option to promote domestic competition.
Submission Date: 17-04-2002 12:00 AM

An Empirical Examination of the Relationship Between Central Bank Intervention and Exchange Rate Volatility: Some Australian Evidence
Michael McKenzie
Arguably, market stability is one of the primary reasons behind government intervention in the foreign exchange market. Whether or not the authorities achieve this goal is an empirical matter and testing of this issue is made difficult by the fact that government intervention and exchange rate volatility may be jointly determined. In this paper, the extent to which volatility drives intervention is considered using PROBIT analysis. The results suggest that while support for the hypothesis exists, volatility on its own does not to provide enough information to allow us to accurately forecast government intervention. A modified GARCH model is then tested which incorporates the impact of government intervention in the mean and conditional variance equation. The evidence presented certainly suggest that the dynamics of the way in which the market evolves are different on the days where the central bank is active in the market.
Submission Date: 01-04-2002 12:00 AM

Poverty Alleviation Policies: The Problem of Targeting when Income is not Directly Observed
Reynaldo Fernandes
Anuatti-Neto / Francisco
Pazello/ Elaine Toldo
This paper aims to propose an indicator to evaluate the degree of targeting of programs to alleviate poverty, which weights success of reaching (families correctly included) and leakage (families wrongly included) in a social program. A proxy means-tested criterion is also proposed, based on estimation of the propensity score (the probability of a family being poor, conditional on covariates). This criterion consists of choosing a cut-off value for the propensity score in such a way as to maximize the proposed indicator. An application of the indicator to the metropolitan regions of Brazil is carried out. It is shown that even when there is a social consensus that policies should be directed toward the truly needy families, a significant degree of mistargeting can persist.
Submission Date: 01-04-2002 12:00 AM

Relative price shocks and food imports under structural adjustment programs in West Africa
Joseph Kargbo

Submission Date: 01-04-2002 12:00 AM

Exchange Rates and Stock Prices: Implications for EU convergence
Bruce Morley

Submission Date: 02-04-2002 12:00 AM

Optimal Patent Length in a North-South Framework: A comment
Swapneddu Banerjee
Kabiraj Tarun
We show that under some conditions the non-innovating south gives patent protection for a longer period than the north. A cooperative patent agreement involves a larger protection by each country compared to the non-cooperative situation.
Submission Date: 04-02-2005 12:00 AM

The Optimal Taxation of Foreign Source Investment Income
Leslie Hull
Current tax rates on capital gains earned by foreigners are either positive or zero in most countries. This paper presents a model of optimal taxation on capital gains earned by foreigners that yields positive optimal tax rates under very general conditions. The optimal portfolio implied by the model mimics the home bias seen in actual portfolios. Simulations are presented which model these tax rates between two symmetric countries and between the United States and the United Kingdom.
Submission Date: 03-06-2002 12:00 AM

Bank Portfolios and Transmission Failure: The Case of Japan
Yuzo Honda

Submission Date: 29-01-2007 12:00 AM

Estimating the Effects of Monetary Policy Shocks: Does Lag Structure Matter?
Douglas McMillin

Submission Date: 28-05-2002 12:00 AM

Purchasing power parity and economic integration among caribbean countries: Evidence from the 1980s and 1990s
Raj Aggarwal
Simmons, Walter
This study documents that Purchasing Power Parity seems to hold for the 1980s and the 1990s among the currencies of the Caribbean. In addition, this study presents evidence of some economic integration and of currency blocs in the region as it documents co-integration among real exchange rates in the Caribbean for the 1990s (after the economic reforms of the late 1980s and early 1990s). These findings mean that currency risks of foreign investments in the Caribbean region can be hedged using common instruments. These findings also have other important implications for policy makers, managers, investors, and scholars interested in the Caribbean region.
Submission Date: 28-05-2002 12:00 AM

An estimation of U.S. Industry-level Capital-Labor Substitution Elasticities: Cobb-Douglas as a Reasonable Starting Point?
Edward Balistreri
McDaniel/Christine
Wong/Eina
A key parameter that determines the distributional impacts of a policy shift in general equilibrium models is the elasticity of substitution between capital and labor. Despite the importance of this parameter in applied modeling, its identification continues to pose a challenge. Given the structure of most growth models, we posit that the true relationship between capital and labor is likely to be close to Cobb-Douglas. Using a rich new data set from the Bureau of Economic Analysis, we estimate substitution elasticities for 28 industries, which cover the entire economy, and provide an indication of the long- and short-run estimates. We fail to reject the Cobb-Douglas specification in 20 of the 28 industries. These findings lend support to the Cobb-Douglas specification as a transparent starting point in simulation analysis.
Submission Date: 28-05-2002 12:00 AM

Fiscal Reform in Mexico. A General Equilibrium Assessment.
Horacio Sobarzo
This paper reports the results of an applied general equilibrium model built to evaluate a recent fiscal reform initiative of the Mexican government. Treating public revenues as endogenous and tax rates as exogenous variables, the model explicitly incorporates both the tax structure and the oil exporting sector as important sources of government revenues. The results confirm that the fiscal problem in Mexico lies in the low degree of tax compliance and not so much in the level of tax rates or fluctuations of the world oil price. A fiscal reform aimed at widening the value added tax base does not seem to have strong income distributional effects. To the extent that developing countries normally face difficulties for raising revenues from direct taxation, given the bad income distribution, these results are important.
Submission Date: 29-05-2002 12:00 AM

Trade reform and employment re-allocation in Kenya
Jorgen Levin
The Kenyan reform programme of the 1990s was disappointing with regard to both per-capita income and employment growth. When trade was liberalised in tandem with labour market rigidities and retrenchment of public employees, this had a significant negative impact on employment generation and households well being. In response to this, activities within the informal sector increased tremendously, and an increasing number of individuals were forced to live below the poverty line. When labour markets are functioning poorly facilitating operations of the union could generate a positive impact not only too members of the union but also to the non-union members.
Submission Date: 22-09-2002 12:00 AM

Sectoral Linkages and Industrial Efficiency:A Dilemma or a Requisition in Identifying Development Priorities?
Vangelis Tzouvelekas
Karagiannis Giannis
This paper attempts to provide an empirical evaluation of the potential relationship between sectoral linkages and technical efficiency using the 1996 US input-output tables. Sectoral input-oriented technical efficiency is obtained by the econometric estimation of a stochastic input-distance function based on Battese and Coelli (1995) model formulation. On the other hand, sectoral backward and forward linkage coefficients were computed using the non-complete hypothetical extraction method suggested by Dietzenbacher and Van der Linden (1997). The empirical results suggest that there is a negative relationship between sectoral efficiency and linkage coefficients, while on the other hand efficient sectors tend to purchase their intermediate inputs from efficient sectors and vice versa.
Submission Date: 14-05-2005 12:00 AM

Government Expenditure and Economic Growth in South Africa
Akinboade O.A

Submission Date: 12-01-2003 12:00 AM

The Impact of Trade liberalization and Government Risk Attitudes on Food Security and Price Stability--An Application on Taiwan Rice
Chi-Chung Chen

Submission Date: 14-10-2005 12:00 AM

Monetary stabilisation in a currency union: The role of catching up member states
Marcelo Sanchez
We examine the conduct of monetary policy in the face of aggregate and sectoral productivity shocks. The stabilisation performance of a currency union depends on the distribution of shocks across the union, as well as on key parameter values. In the case of uniform structural parameters, the currency union exhibits better stabilisation properties than autonomous monetary policy. Catching up member states are likely to imply cross-country specificities in structural parameters and disturbances. When we allow for country-specific trade-offs between output and inflation, autonomous monetary policy is found to dominate a currency union if member states face idiosyncratic or asymmetric sectoral productivity shocks. In addition, numerical simulation results indicate that the currency union\'s performance depends on the relative importance of aggregate and sectoral productivity disturbances. Catching up countries would benefit from preserving monetary policy autonomy in case intense sectoral readjustments represent the dominant feature of their economies.
Submission Date: 30-09-2005 12:00 AM

The Welfare impact of the exchange rate adjustment in Seychelles and possible mitigation mechanisms
Oleksiy Ivaschenko
In this paper, we investigate the potential welfare impact of the currency devaluation planned by the Seychelles? authorities. The changes in wages and prices that are likely to be triggered by devaluation are estimated separately using the financial programming model. We apply those predicted changes to the unit record household survey data to analyze the impact of devaluation on poverty and inequality. We also investigate how effective and costly are various policies designed to mitigate the adverse effects of devaluation. The results indicate a relatively small negative impact of devaluation on the incidence of poverty and effectively no impact on inequality. The relative loss in per capita expenditure varies from 5% for the poorest to 10% for the richest quintiles of the expenditure distribution. Even in the absence of any mitigation policies the occurred welfare losses can be regained by two consecutive years of per capita GDP growth of 3% per annum that is predicted to result from devaluation. The estimates suggest that the policy of keeping social spending constant, or slightly increased, in real terms is consistent with ensuring that poverty remains at its present levels despite devaluation. This policy is better targeted to the poor and more cost-efficient than the policy of subsidizing the prices of food staples.
Submission Date: 09-10-2005 12:00 AM

Impacts of Regional Economic Integration on Industrial Relocation through FDI in East Asia
Young-Han Kim

Submission Date: 31-12-1969 6:00 PM

Policy change, Input supply liberalization and missing markeets in Malawi
Gerald E Shively




Submission Date: 28-06-2009 12:00 AM