Journal of Policy Modeling
Subscription Information Search About This Page Back to the Homepage

Back to Working Papers


Current Issues - EconModels.com

Explaining the US-Canada productivity gap: the role of spillover effects and human capital
Marcella Lucchetta
Michael Donadelli
Antonio Paradiso
This paper investigates the sources of the US-Canada productivity gap. We rely on a standard production function in which disembodied technology is assumed to be driven by spillover effects and human capital, and apply a general-to-specific-approach to identify those variables that best explain the level of productivity in the two countries. We find that the absence of investment spillover effects, low innovation rate, and non-recognition of high-skilled workers’ credentials in Canada represent the main sources of the gap.
Submission Date: 29-06-2014 08:52

Tackling undeclared work
Francesco Giuli
Giuseppe Ciccarone
Enrico Marchetti
The paper evaluates the relative effect of deterrence, prevention, curative and commitment policy measures on the size of undeclared work in a real business cycle model with moonlighting production, tax evasion and search frictions in the labor market. A numerical application of the model to the European economy shows that all these approaches reduce the undeclared share of output, but that deterrence and commitment policies also produce a negative effect on stationary employment. The curative approach produces the sharper fall in undeclared work while stimulating stationary output and employment.
Submission Date: 06-09-2012 09:03

Consequences of the Insurance Intermediary Commission\\\\\\\'s Smoothing
Gábor Regős
The paper investigates the consequences of a regulation prescribing that commission of insurance intermediaries should be paid smoothly, as a function of the arriving insurance premiums instead of paying a high acquisition commission at the beginning of the contract and only smaller commissions later. The regulation’s effects are investigated with a model and its simulation. As a result we obtain that after the intervention income of the decreasing number of intermediaries staying on the market will increase, number of intermediaries leaving the market decreases, and the ones staying on the market will have a better ability to gain consumers compared to the original case.
Submission Date: 08-03-2013 06:22

Stochastic Regional Convergence in China: A Non-Linear Perspective (1952-2007)
Javier Ordóñez
This paper investigates the notion of stochastic convergence behaviour across the Chinese provinces. Unlike previous research, this paper highlights the relevance of the level of technology in each province and takes into account the economic geography by examining the regional clusters. However, the novel aspect of this research lies in the introduction of structural breaks and non-linearities in the model to take into account the significant transformation of the Chinese economy. The results indicate that the regional clusters are relevant to the convergence behaviour across China, when both the Administrative division and the regional clusters are considered. However, the number of provinces that are converging is higher in the latter case. When non-linearities were considered across the regional clusters, we found that 18 provinces have already converged with their cluster, 3 provinces are catching up, and 10 regions show divergence. These findings are of great interest for the design and development of national and regional economic policies in the Chinese economy.
Submission Date: 30-06-2011 05:44

Government size and economic growth in Greece: A smooth transition approach
Firouz Fallahi
Jalal Montazeri Shoorkchali
This paper tries to verify the existence of the Armey curve, which states that there is an inverted U-shaped relationship between the government size and the economic growth. To that end, we use annual data over 1961-2008 to examine the existence of Armey curve in Greece. Instead of relying on a binomial model, which is very popular in the literature, we use a smooth transition regression (STR). STR models are very flexible and binomial models are considered as a special case of the STR models. The results show that there is a nonlinear connection, i.e., a threshold effect, between the government spending and the growth rate in the Greek economy. However, since the relationship is positive in both regimes, i.e., before and after the threshold, we cannot confirm the existence of Armey curve in the Greek economy.
Submission Date: 03-09-2012 07:02

Agriculture in Portugal: linkages with industry and services
Marta Simões
João Gaspar
Gilson Pina
We estimate a trivariate VAR model for the period 1970-2006 to investigate the existence of long-run relationships and causality among the three main sectors in Portugal in terms of value added and productivity. Agricultural value added is found to be both weakly and strongly exogenous so it exerted no influence in the other sectors expansion nor was it influenced by their growth. The results with labour productivity show that productivity gains in services and industry feedback into productivity growth in agriculture, although the link is weaker in the industry case. The definition of balanced policy strategies across sectors in Portugal should take these results into consideration.
Submission Date: 03-11-2012 17:00

The relationship between energy consumption and economic activity in EU-27 countries: testing the neutrality hypothesis
Vladimir Hajko
The aim of the article is to test the \\\'neutrality hypothesis\\\' between the energy consumption and the economic activity in the EU-27 countries. The evidence speaks for the rejection of the \\\'neutrality hypothesis\\\' in favor of the \\\'growth hypothesis\\\'. The results differ between the original and the new EU member countries. The original member countries exhibit tendency to increase their economic growth with energy savings. However, in case of the new member countries there seems to be a negative impact of energy savings on the economic growth. For sectoral energy consumption, the main drivers of the causality in the relationship are the residential sector, industry and services. The residential energy consumption savings appear to increase the economic growth in both original and new member countries. The role of the energy consumption savings in the industrial and services\\\' sector differ. For the industrial sector, in the original member countries the energy consumption savings increase economic growth, while in the new member they may hinder the economic growth. In services, the energy consumption does not seem to have an impact in the original member countries, while in the new member countries the savings in energy consumption seem to degrade the economic growth.
Submission Date: 28-06-2012 01:50

Public policies simulation on speed of economic convergence
DELGADO RODRÍGUEZ MARÍA JESÚS
María Jesús Delgado Rodríguez
Sonia De Lucas Santos
Inmaculada Alvarez Ayuso
We present an empirical proposal, within a neoclassical growth framework, to use the speed of convergence as a criterion for the evaluation of public policies. The proposal makes it possible to compare, in terms of convergence speed, the results obtained in the economies with the policies implemented during a certain period to the results that could have been obtained under alternative policies. We illustrate our approach generating simulated public policies in infrastructure and in human capital endowments in the EU countries during the 1980-2010 period. Results provide support for the coordination of these policies between the EU member states.
Submission Date: 04-02-2013 10:02

Cyclical components and dual long memory in the foreign exchange rate dynamics: the Tunisian case
rania jammazi
Aloui chaker
The purpose of this paper is to question the traditional conventional view on the exchange rate targeting that real shocks have permanent effect on exchange rates (FX) however nominal shocks are not. Thus, an empirical approach is proposed in order to analyze the transitory component dynamics of some major Tunisian interbank FX rates for the period 1999-2005. Our results reveal that the use of the Guy and Amant’s (2005) method allows us to select the Hodrick Prescott with two powers as an optimal filter for extracting the daily interbank FX rates’ cyclical components. More importantly, the joint estimations of an ARFIMA model in the mean equation and various long-memory GARCH-type models in the variance equations reveal that cyclical components seem to be well described by dual long memory models. On the practical side, our findings provide important evidence that transitory trend fluctuations are not quickly trend–reverting but they are rather dominated by permanent deviations from the equilibrium values. Accordingly, contrary to policy makers’ ambitions for the Tunisian dinar, our study appears to confirm the view that monetary shocks may also (as for real shocks) be a difficult task of stabilization policy. This result may have several important implications for monetary policy in most developing countries. Keywords: exchange rates; time series decomposition; HML test; dual long memory
Submission Date: 07-12-2012 11:52

TOTAL FACTOR PRODUCTIVITY AND CROSS-BORDER FDI FLOWS IN OECD COUNTRIES - A PANEL DATA ECONOMETRIC ANALYSIS
Neil Karunaratne
Neil Karunaratne
The role of FDI inflows and outflows to host countries and from the source countries emerged in the 1980s as the major vehicle technology transfer that accelerated the globalization or international integration of 25 leading OECD economies over a period of 25 years (1983-2007). Although neoclassical and endogenous growth theories provide unequivocal support for FDI flows because they generate positive externalities or spillover effects through channels of GDP growth, capital formation and R&D, the empirical evidence in support of these claims are mixed. The panel data econometrics performed using a new multiplicatively complete index of total factor productivity provide fresh insights on the cross-border FDI generated through technology transfer and other channels. The empirical findings for the OECD countries are markedly different from the spillover effects on developing countries that are plagued by technology absorptive capacity effects due to the operation of threshold effects of underdeveloped human capital resources. The empirics on cross-border FDI flows and the spillover effects that they generate in OECD countries will provide much needed information to design and implement policies to harness the net benefits from cross-border FDI flows and shed light on the design of policies to reconcile the conflicting policies of austerity and growth that are required to prevent the sovereign debt racked euro-zone countries from imploding the single currency union based on the euro.
Submission Date: 02-12-2012 00:13

Does Central Bank Independence Affect Public Debt?
Stephanos Papadamou
Moïse Sidiropoulos
Eleftherios Spyromitros
There is an ongoing debate on the role of central bank independence in a crisis period, where national economies are preoccupied with their escalating sovereign debt. Inspired from a simple theoretical macroeconomic model, proposed by Ozkan et al. (2010), which shows a positive link between public debt issues and central bank independence, we empirically investigate if central bank independence has an impact on the net stock of government securities and public debt. Our research has been focused on various levels of independence of the central bank of 22 countries from 1992 to 2000. By applying dynamic panel data analysis, we show that central bank independence has a significant impact on the effects of deficit, GDP growth and government bonds yield on government bond issues and public debt. The latter result implies that higher level of central bank independence makes countries more affected by market conditions.
Submission Date: 04-07-2012 06:46

The Interaction between the Macroeconomy and House Price Returns
Bruce Morley
Qijia Wei
This study aims to assess the relationship between house price return and the main macroeconomic variables using recent US data. A Vector Autoregression (VAR) approach is employed and the results suggest strong correlations can be found between the house price return and nominal interest rate. However the lagged effect of the interest rate cannot explain the movement in house price returns, although the shock to the nominal interest rate has a contemporaneous effect on the house price return and this confirms the theoretical predictions that monetary policy affects the housing market. This indicates that monetary policy is an efficient tool to manage the housing market in the US.
Submission Date: 22-01-2013 07:21

Dynamic relationship between electricity consumption and economic growth in a small open economy: the case of Bahrain
Helmi HAMDI
Rashid SBIA
The aim of this paper is to investigate the causal relationship between electricity consumption and GDP growth for the kingdom of Bahrain during the period 1980
Submission Date: 11-04-2012 06:07

MODELLING RENEWABLE ENERGY MANAGEMENT INEFFICIENCY IN EUROPE WITH PANEL DATA STOCHASTIC FRONTIER MODELS
ANGELIKI MENEGAKI
The paper employs three stochastic frontier inefficiency configurations to categorize European countries according to their inefficiency in renewable energy management. The results come from an empirical application of a panel with 32 European countries over a 14 year old period using a translog type production function. In particular the paper focuses on results from the Alvarez et al. (2006) fixed management model and compares results with the conventional stochastic frontier model and the random coefficients model with inputs such as renewable energy, fossil fuel energy, employment, capital and carbon emissions. The results suggest that renewable energy deployment does not significantly affect growth in Europe, wherein management inefficiency becomes eloquent with the aid of the management adapted frontier model.
Submission Date: 30-08-2012 01:44

Nexus of Economic Growth, Energy Consumption and CO2 Emission in Sri Lanka: A Bound Test Approach
Sujith Jayasooriya
Economic growth, energy consumption, and CO2 emission are vital determinants in sustainable energy policies for energy resource planning. The paper explores a long run nexus of these instruments by ARDL approach establishing energy consumption challenges and economic growth, and pricing policies to change the energy mix in Sri Lanka. The ARDL approach revealed an existence of long run relationship among these variables, when energy consumption is an endogenous. The results indicate that CO2 emission and growth are positively related with energy consumption in long run, a contradictory causal linkage with the theories. However, the short run nexus also advocated long run evidences that the growth and emission causes energy consumption. The results leads to amend the policy on energy use pattern with the appropriate pricing while enhancing the energy source mix need for sustainable energy consumption plan for economic growth.
Submission Date: 15-10-2011 09:38

Crop Returns, Prices, Credit and Poverty in Lao-PDR
Samuel Annim
Raghav Gaiha
With Lao PDR’s macroeconomic performance currently booming, we investigate the country’s poverty situation by examining the drivers of household poverty. This paper tests four major hypotheses; (1) whether higher returns on all crops harvested per capita reduces consumption expenditure, food expenditure and World Bank’s US$1.25/day (PPP, 2005) poverty cut-offs? (2) whether higher returns on glutinous rice harvested per capita also reduces poverty? (3) whether higher crop prices lower poverty? and (4) whether easier access to credit contributes to poverty reduction? Data on 5,031 households from the fourth round of the Laos Expenditure and Consumption Survey (LECS IV) is used to estimate Probit and instrumental variable Probit equations. Potential endogeneity of some of these variables (e.g. returns to crops harvested) is addressed through appropriate instrument variables. Briefly, returns on crops harvested reduce different measures of poverty (e.g. food poverty, dollar poverty), as also higher producer prices and easier access to credit. An important policy conclusion in light of MDG 1 is the imperative of higher returns on rice and glutinous rice, more remunerative prices for farmers and easier access to credit. These areas of policy concern assume greater importance as Laos prepares for its accession to WTO. An accelerated market-orientation of agriculture may induce not just greater efficiency but also more equitable outcomes.
Submission Date: 25-02-2012 11:38

Dynamic Interaction between House Prices and Stock Prices in Malaysia
Hooi Hooi Lean
Russell Smyth
This paper examines the dynamic linkages between house price indices, interest rates and stock prices in Malaysia using cointegration and Granger causality testing. For Malaysia as a whole, we find that house prices, stock prices and interest rates are not cointegrated. For Kuala Lumpur, Penang and Selangor we find that house prices, stock prices and interest rates are cointegrated for 40 per cent of the house price indices. When there is evidence of cointegration in these regions, we find that stock prices lead house prices. While there are alternative potential reasons for this finding, such as slow adjustment of house prices in response to a shock in the fundamentals, it is consistent with a wealth effect. A likely explanation for this result is that in these states, compared with the Malaysian average, housing is expensive, income is high and real estate is used much more as an investment vehicle by both wealthy Malaysians and foreigners leveraging of the share market.
Submission Date: 15-04-2012 19:00

Re-examining foreign direct investment and growth nexus in Nigeria
Enisan Anthony Akinlo
The paper investigates the FDI-growth nexus in Nigeria during the period 1970-2009 using a multivariate VAR model. The results of the estimation show that real gross domestic product, oil FDI and non oil FDI are cointegrated and that there is only unidirectional causality running from real GDP to non oil FDI in the short run. Non oil FDI has larger significant positive impact on economic growth than oil FDI. Thus, government should develop a set of policies that are not only focused on inwards FDI promotion in the non oil sector but also on implementation of policies to integrate the oil sector into the national economy to enhance oil FDI spillover.
Submission Date: 16-01-2012 06:28

Modeling Viable Business Process for ICT Policy Management
Reza Alinaghian
This paper demonstrates the abstract of Information and Communication Technology (ICT) policy significances in order to reflect the importance of the study. In addition, brief of issues, challenges and shortcomings that ICT policy analysis is currently facing are highlighted. In other words, the background of ICT policy problem is illustrated. The paper then discusses strengths and weaknesses of Business Process Modeling (BPM), the suitable technique for ICT policy analysis proposed by scholars. Subsequently, a business process model for ICT policy management is proposed. The weaknesses of BPM are significantly tackled with the application of Viable System Model (VSM). In fact, there are various considerations taken into account while formulating the proposed solution. Considerations such as: a- current ICT policy management issues and challenges of the case study organization and b- viable requirements, including the systemic structure of VSM. However, the case study organization is the second biggest Malaysian Public Institution of Higher Education. It currently has 14 faculties, 14 residential colleges and 6 schools. There are more than 20,000 students enrolled in the university. The university has about 2000 lecturers. This paper reflects part of a PhD project.
Submission Date: 13-04-2012 04:18

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 14:53

Who Has to Pay for Their Education? : Evidence from European Tertiary Education
Gieyoung Lim
Chong-Uk Kim
This paper investigates a positive tertiary education externality in 18 European countries. Using a simple Cobb-Douglas-type production function with constant returns to scale (CRS), we find that there are positive spillover effects from tertiary education in European countries. According to our model prediction, on average, 72,000 new employed persons with a tertiary education increase GDP per employed person without a tertiary education by US$412 in 2005. From the policy perspective, the existence of positive tertiary education externalities implies that the benefits of tertiary education are diffused through not only education beneficiaries but also the other members of society.
Submission Date: 18-04-2012 06:11

The Role of Taxes as an Automatic Stabilizer: Evidence from Turkey
Huseyin Sen
This study tries to empirically investigate the interactions between various taxes and GDP and to detect whether taxes function as an automatic stabilizer in Turkey. First of all, using time series unit-root test proposed by Dickey-Fuller (1979), econometric findings reveal that the variables of taxes and GDP in level are not stationary. Secondly, employing co-integration tests designed by Johansen (1988), it is found that GDP and taxes are co-integrated. Thirdly, the Engle-Granger (1987) causality test is employed, which shows that unidirectional causality exists among taxes, that is running from GDP to SCT & PIT and it is from VAT & CIT to GDP. Findings show that personal income tax is the most effective tax in stabilizing business cycle fluctuations, and the second is corporate income tax. Keywords: Automatic Stabilizers, Fiscal Policy, Unit-Root Test, Co-integration Analyse, Engle-Granger Causality Test, Personal Income Tax, Corporate Income Tax, Turkey.
Submission Date: 09-02-2012 04:02

The stability of money demand: Evidence from Turkey
Chaido Dritsaki
Melina Dritsaki
Demand for money is an important macroeconomic relationship. Its stability has implications for the choice of monetary policy targets. The current study examines the stability of money demand function in Turkey from January 1989 to May 2010. In other words, it estimates the demand for narrow money in Turkey and evaluates its robustness and stability. Considering the economic reforms and financial crises in Turkey, it is found that there exists a well-determined instability for money demand and its dynamics are adequately captured by cointegration and error correction models. Finally, the conclusions from the estimation of the impulse response functions show that interest rate causes the largest shift in money demand as well as in the industrial production.
Submission Date: 09-02-2012 11:04

Impact of oil price shocks on macro-economy: evidence from an oil importing developing country
Sajal Ghosh
Kakali Kanjilal
The study investigates the dynamic impact of linear and various non-linear specifications of oil price shocks on some macroeconomic variables for an oil importing developing country
Submission Date: 16-04-2012 06:22

Impact of oil price shocks on macro-economy: evidence from an oil importing developing country
Kakali Kanjilal
The study investigates the dynamic impact of linear and various non-linear specifications of oil price shocks on some macroeconomic variables for an oil importing developing country
Submission Date: 16-04-2012 03:23

Home Country Macroeconomic Influences on Outward Cross-border Mergers and Acquisitions: Evidence from the UK
Agyenim Boateng
Xiuping Hua
Moshfique Uddin
Min Du
Prior studies examining the trends of mergers and acquisitions (M&As) have concentrated on host country macroeconomic influences with relatively little attention on home country. In this paper, we use a non-linear modelling approach, the Exponential GARCH (EGARCH) model, to investigate dynamic effects of macroeconomic shocks on the UK outward M&As over the period 1987Q1 to 2008Q1. Our results indicate that a number of home country macroeconomic variables, including economic output, producer price, broad money supply and real effective exchange rate play an important role in explaining the trends of cross-border mergers and acquisitions outflows by the UK firms. The findings support the notion that home country macroeconomic factors can create the advantages to improve the outward Cross-border M&A activities.
Submission Date: 21-07-2012 16:04

Real convergence and its illusions
Marcin Kolasa
This paper uses a multi-country dynamic general equilibrium model to illustrate dynamic adjustments in a small open economy undergoing real convergence. Our results indicate that even if catching-up is driven by gradual processes, the dynamic responses of key macrovariables can be far from smooth. We also find that overly optimistic expectations about current or future productivity shifts can generate sizable boom-bust cycles. A comparison across alternative monetary regimes reveals that a flexible exchange rate helps to smooth real convergence processes and misperceptions associated with tradable sector productivity, while it generates more volatility in scenarios based on nontradable sector productivity developments.
Submission Date: 11-04-2011 02:25

IS THERE A TRIPLE DIVIDEND EFFECT FROM A TAX ON FERTILIZER USE? A COMPUTABLE GENERAL EQUILIBRIUM APPROACH
Abeer Elshennawy
ABSTRACT: Although the existence of an environmental dividend to green taxes is beyond dispute, the same is not true for the efficiency or double dividend. Given the wide spread excess fertilizer use by farmers in Egypt with serious repercussions for water pollution and contamination of agriculture goods, using a static CGE model, this research attempts at assessing the magnitude of the double dividend from the imposition of a tax on fertilizer use. The paper further assess whether there is a triple dividend effect from improved market access to agricultural goods following the reduction in fertilizer use.
Submission Date: 13-02-2012 05:47

Capital Flows and Current Account Dynamics in Turkey: A Nonlinear Time Series Analysis
Aydin Cecen
Linlan Xiao
The paper offers an analysis of current account dynamics and its sustainability in Turkey using quarterly data. The focus is on the nonlinear characterization of the long – run intertemporal budget constraint and the stationarity tests. Several well-known tests are applied to identify nonlinearity in the current account time series. The analysis reveals that while the classical unit root tests based on linear specification give rise to conflicting results as to the nonstationarity of the current account deficit series, a threshold unit root test due to Caner and Hansen (2001) fails to reject the null of nonstationarity, implying that the intertemporal budget constraint would not be satisfied in the long run.
Submission Date: 12-04-2012 12:12

THE IMPACT OF LATER RETIREMENT AGES ON AGGREGATE HOUSEHOLD SAVINGS AND SAVING RATES: AN ANALYSIS OF OECD COUNTRIES
Aylit Romm
Martha Wolny
As a result of population aging, governments of many OECD countries have begun to implement policies to increase average retirement ages in an attempt to alleviate some of the financial strain in supporting retirees. This paper explores the effect that later retirement ages have on aggregate household saving rates, both on a theoretical and empirical level. Using a two-wave panel of OECD countries, the results show that later retirement ages have the effect of decreasing aggregate household saving rates. We show that it is likely that this corresponds to a decrease in household saving. In addition, it appears that it is increases in female retirement ages that is driving this result.
Submission Date: 27-06-2012 03:56

Empirical Findings on Triplet Deficits Hypothesis The Case of Turkey
Mehmet SENTURK
Ali SEN
Canan SANCAR
Mehmet SENTURK
Yusuf Ekrem AKBAS
1980 - 2010 covering the period of this study, triplet deficits clear whether the concept applies in Turkey were investigated. In this respect, the first of the series stagnation order to unit root tests are completed. Then, in order to determine the direction of the relationship between variables “Dolodo-Lütkepohl Granger Causality Analysis” was. In addition, the VAR analysis and the variables interact with each other in order to determine the degree of the variance decomposition and Impulse - Response analysis was applied. As a result, the current account deficit and budget deficit are cousality to savings deficit.
Submission Date: 31-01-2012 04:22

Current account sustainability in advanced economies
Matteo Lanzafame
This paper investigates the sustainability of current accounts in advanced economies, using a panel of 27 countries and annual data over the 1980-2008 period. We find strong evidence in favour of nonlinear but stationary current-account trajectories for 14 countries, while the remaining 13 appear to be nonstationary and, thus, unsustainable. Our analysis indicates that careful empirical modeling of current-account dynamics, particularly in relation to crosssection dependence and nonlinear behaviour, is crucial for appropriate economic policymaking.
Submission Date: 28-05-2012 11:38

Information and Capital Flows Revisited: the Internet as a determinant of transactions in financial assee@kiep.go.kr CoAuthor(s): First Name : Last Name : Email Address: First Name 2: Last Name 2: Email Address 2: First Name 3: Last Name 3: Email Address 3: First Name 4: Last Name 4: Email Address 4: Paper Details: Title of the Article:* Information and Capital Flows Revisited: the Internet as a determinant of transactions in financial assets Hard Copy Submitted: Hard Copy # of Pages: Excluding graphs and tables Hard Copy # of Graphs: ets
Dong-Eun Rhee
Changkyu Choi
Yonghyup Oh
This paper investigates the determinants of international transactions in financial assets empirically. We extend the gravity model in Portes et al. (2000) by introducing an internet variable. Using cross-country panel data on the portfolio flows between the US and other countries from 1990 to 2008, we found that the Internet turns out to mitigate the information asymmetries and thus increases the cross-border portfolio flows between countries.
Submission Date: 02-05-2012 08:37

Wink face model: Reflecting all aspects of emergency management in South Korea
Kyoo-Man Ha
This article aims to help ordinary Koreans to distinguish the entire scope of emergency management by initially providing the wink face mode as a model. Literature review has been heavily used with the support of interviews, as a methodology. The key finding is that the wink face model can bounce all components of emergency management by classifying four factors as a human wink face: main belief ( , a mouth), risk-oriented management with cutting-edge technology (+, an open eye), limited rationality (-, a closed eye), and contingency ( , a face line). The value of the article is that suggesting the wink face model will be a starting point for emergency management in Korea, because the model is convenient to remember as well as simple to grasp as it utilizes both four mathematical signs and their locations.
Submission Date: 17-02-2012 05:54

Human Capital, Innovation, and Climate Policy: An Integrated Assessment
Enrica De Cian
Carlo Carraro
Massimo Tavoni
This paper looks at the interplay between human capital and innovation in the presence of climate and educational policies. Using recent empirical estimates, human capital and general purpose R&D are introduced in an integrated assessment model that has been extensively applied to study climate change mitigation. Our results suggest that climate policy stimulates general purpose as well as clean energy R&D but reduces the incentive to invest in human capital formation. Human capital increases the productivity of labour and the complementarity between labour and energy drives its pollution-using effect (direct effect). When human capital is an essential input in the production of generic and energy dedicated knowledge, the crowding out induced by climate policy is mitigated, thought not completely offset (indirect effect). The pollution-using implications of the direct effect prevail over the indirect contribution of human capital to the creation of new and cleaner knowledge. A policy mix that combines educational as well as climate objectives offsets the human capital crowding-out with a moderate, short-term consumption loss. Human capital is complement to all forms of innovation and an educational policy stimulates both energy and general purpose innovation. This result has important policy implications considering the growing concern that effective climate policy is conditional on solid economic development and therefore it needs to be supplemented by other policy targets.
Submission Date: 16-03-2012 16:36

Interest rates close to zero, post-crisis restructuring and natural interest rate
Piotr Cizkowicz
Andrzej Rzonca
Central banks seem not to account for the influence of interest rates close to zero on the natural interest rate after the bursting of the asset bubble which triggered financial crisis. We claim that this omission may have deleterious consequences. Should interest rates close to zero persistently decrease natural interest rates, that would mean fall in TFP growth and more limited central bank
Submission Date: 26-02-2012 05:15

Health Expenditures and Externalities: Their Contribution to Economic Growth for publication in the Journal of Policy Modeling
Suzanne Wisniewski
Terry Roe
This paper develops a dynamic, endogenous growth model that reveals the various pathways through which health expenditures, in the presence of an externality, augment labor effectiveness causing capital deepening and growth. In an inter-temporal environment, competitive firms employ capital and labor services, the latter is endogenously determined by households\\\' inter-temporal choice to allocate some forgone consumption to health expenditures to augment own effective labor. These expenditures in turn lower harmful health externalities on other workers due to a lessening of the communicable nature of disease. The growth-health path ways suggest various potential points for policy interventions to ameliorate productivity, avoid a poverty-like trap and to enhance economic growth.
Submission Date: 23-11-2011 15:11

Testing the Validity of Wagner’s Law in Bolivia: A Cointegration and Causality Analysis with Disaggregated Data
Antonio Bojanic
Nine versions of Wagner’s law are examined employing annual time-series data on Bolivia for the period 1940-2010. The analysis is an advance over previous work in several ways. First, the hypothesis of a long-run relationship between different types of government expenditures and income is tested via cointegration analysis. Second, Error Correction Models are utilized to determine the direction of causality between the variables of interest. Lastly, the study comprises a period of seventy years, the longest of its kind for Bolivia. Consistent with Wagner’s proposition, bidirectional Granger causality is found between income and government expenditures in six of the nine versions of the law. The findings also suggest that government expenditures do not exert a positive influence on growth, hence the need to rethink how public funds are spent on a variety of public services.
Submission Date: 25-05-2011 07:06

Kaleidoscopic Damping: Optimal Labor Adjustment for International Trade Induced Sectoral Shifts with Applications to Brazil
David Hudgins
Jill Bourgeois
This analysis develops a framework to optimally mitigate the transitional unemployment that results from the sectoral shift induced by temporary losses in international competitiveness. Since globalized trading allows for kaleidoscopic comparative advantage that alternates back and forth between industries and countries, this induces volatility in employment that creates losses when workers are displaced. A stabilization policy could be used to dampen this kaleidoscopic effect so that the sector does not overly downsize in response to the temporary portion of the shifts. We simulate the Brazilian manufacturing sector in order to demonstrate the welfare benefit of a pragmatic kaleidoscopic damping policy.
Submission Date: 15-02-2012 11:40

On National Fiscal Policy and Growth: Searching for Optimality under Externality
Christos Stournaras
In this paper, we examine the view of capital fundamentalism claiming that national fiscal policies, with public investment being subject to adjustment costs, can be considered as the primary determinant of economic growth. According to our analysis, a country that experiences a low rate of growth with a relatively low public to private capital ratio can generate and attain a higher long-run rate of economic growth, equivalent to the growth rate of public capital. It is revealed that the after-tax marginal product of capital, hence the rate of return, depends positively on the ratio of private to public capital, something that sharply contradicts the results obtained in the rather traditional strand of research where the rate of return was invariant with that particular ratio. We also reconsider some properties of optimal fiscal policy and conclude that, in accordance to conventional priors, maximisation of the private-sector utility function corresponds to maximisation of the growth rate of the economy
Submission Date: 18-09-2011 10:19

Macro Determinants of Total Factor Productivity Growth of Agriculture in Pakistan
khalid mushtaq
asghar ali
Muhammad Ashfaq
Abedullah Abedullah
Phil Dawson
The role of productivity in accelerating the pace of economic growth is well recognized in the literature. With continual population growth, a diminishing supply of per capita arable land, limits to further expansion of cultivated land and slowing returns to further input intensification, there is growing need for food supply increases that could only originate from productivity growth rather than increase in inputs The present study investigated the impact of different macro variables on Total Factor Productivity (TFP) of agriculture in Pakistan by employing cointegration analysis analysis for the period from 1971 to 2006. The results indicated that human capital, infrastructure development and credit resources were positively associated with TFP of agriculture. Openness of agricultural economy observed a significant positive impact on productivity. Macroeconomic stability influenced TFP growth negatively and significantly. Real per capita income indicated positive but insignificant relationship with productivity growth. The strong two way Granger-causality was observed between productivity and human capital development; and infrastructural development. Overall the results explained that policies which promote human capital, increase credit resources in agriculture, improve infrastructure development, facilitate openness of agricultural economy, ensure macroeconomic stability and rise in real per capita income; will improve productivity and competitiveness of Pakistan agriculture.
Submission Date: 11-12-2011 23:05

Nominal Rigidities, Government Spending, and Long-Run Policy Trade-Off
Eiji Tsuzuki
Tomohiro Inoue
We introduce a simple government that consumes the income taxes collected from households into a model with sticky prices and nominal wages proposed by Tsuzuki and Inoue (2010), which introduces a constant rate of technological change and a constant rate of money growth. Government consumption spending provides households with utility. Tsuzuki and Inoue (2010) examined whether a monetary policy trade-off exists between stabilizing the welfare-relevant employment gap and curbing inflation in the steady state when the rate of technological change decreases. They showed that if only prices are sticky, there is no monetary policy trade-off. However, if both prices and nominal wages are sticky, a monetary policy trade-off exists. We consider whether a monetary policy trade-off exists between stabilizing the welfare gap and curbing inflation when the government sets the income tax rate optimally (so that it maximizes household utility). If only prices are sticky, no trade-off exists; however, if both prices and nominal wages are sticky, a trade-off exists. We also examine the dynamic property (determinacy of equilibrium) of the model. The equilibrium is indeterminate under the rule of a constant rate of money growth; however, the equilibrium is determinate when a simple Taylor rule is introduced.
Submission Date: 29-12-2011 02:24

SHOULD THE SOUTH AFRICAN RESERVE BANK RESPOND TO EXCHANGE RATE FLUCTUATIONS? EVIDENCE FROM THE COSINE-SQUARED CEPSTRUM
Rangan Gupta
Empirical evidence on the whether the inflation-targeting South African Reserve Bank (SARB) should also consider responding to exchange rate fluctuations, are contradictory. Against this backdrop of contradictory evidence, we revisit the issue by questioning if the inflation rate is more volatile than it would have been had South Africa not moved to a flexible exchange rate regime in 1995, using the cosine-squared cepstrum. We find that the CPI inflation in South Africa has become more volatile since the second quarter of 1995, post a flexible exchange rate regime, than it would have been had the country continued to pursue a fixed exchange rate policy. Based on this result, we can conclude that the SARB should perhaps respond to exchange rate fluctuations, however, we also warn against the cost of increased volatility in output that is likely to result from targeting exchange rate variability.
Submission Date: 05-01-2012 07:02

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 16:33

Modeling of Financial Embargo on South Africa: Theory and Application
Manuchehr Irandoust
Ghada Gomaa A. Mohamed
The paper examines the effectiveness of the financial embargo on South Africa, which was imposed in 1985 and lifted in 1993. The theoretical framework is a simple small open economy version of Ramsey’s growth model calibrated to South African conditions. The South African embargo event is modelled by limiting the country’s ability to borrow through imposing a proportional tax on foreign borrowings to capture the disinvestment during the embargo period, and by assuming apartheid as a constant tax on foreign borrowings to South Africa we incorporate the effect of the embargo on South African apartheid. Using quarterly data from 1960 to 2008, our empirical findings, based on the logit and intervention methods, indicate that (i) there is a negative relationship between financial isolation and foreign investment and (ii) there is a negative link between the embargo and the degree of apartheid. The policy implication of our results is that the financial embargo was effective in dismantling South African apartheid.
Submission Date: 17-02-2012 22:16

Economic Growth and Government Debt: Evidence from the Young Democracies of South America
Manoel Bittencourt
We investigate in this paper what are the main determinants of government and external debt in South America. Our sample purposely includes nine South American countries that redemocratised in the last thirty years or so, and the data cover the period between 1970 and 2007. The results, based on principal component and dynamic panel data analyses (we use the Pooled OLS, Fixed Effects, Fixed Effects with Instrumental Variables, DIF-GMM and SYS-GMM estimators), suggest that economic growth, predictably via the automatic stabilisers, has had the ability of significantly reduce debt in the region. Other important candidates suggested by the literature, such as inflation, inequality and constraints on the executive (variables that some would deem important within the rather turbulent South American context), do not present the expected or clear-cut estimates on debt. Essentially, the former suggests that the (neoclassical) tax-smoothing model holds in South America, which---in times of a severe debt crisis in Europe---is very suggestive of the importance of public policies designed towards generating fast economic activity and prosperity in keeping debt, at least, under control. Keywords: Growth, debt, South America. JEL Classification: H60, N16, O11, O54.
Submission Date: 06-05-2012 09:05

Stock Prices and Inflation: Relationship Revisited
ARUP MITRA
SANGEETA CHAKRAVARTY
This study examines the nature of relationship between inflation and stock price movement. The analytical literature mentions the possibility of a negative and a positive relationship both. Using the VAR framework based on monthly data for wholesale price index, index of industrial production, exchange rate, stock prices and foreign institutional investment we note that stock prices have an impact on inflation whereas the causality in the reverse direction is not prominent. The results from the impulse response function tend to suggest that the nature of relationship is rather negative. When stock prices are low the firms are reluctant to tap the capital market. Unless bank finance can substitute adequately for the capital market firm’s investment plans would be hit and production would decline. This may result in a price rise as the market demand may exceed the supply. An important policy implication is augmentation of production by encouraging investment through inexpensive bank finance. However in the very long run as we observe from the co-integrating equation, inflation influences stock prices and that too in a positive direction. Unexpected inflation raises the firm’s equity value if they are net debtor. Similarly tightening of monetary policy can reduce inflation and stock prices both as individuals will be left with less money to buy goods or buy stocks.
Submission Date: 18-04-2012 06:53

FISCAL FEDERALISM AND REGIONAL INEQUALITY: THE SPANISH CASE (1986-2007)
Roberto Montero-Granados
Juan de Dios Jiménez-Aguilera
Pedro Barrilao-González
Villar-Rubio Elena
From the perspective of fiscal decentralisation, the decentralization of public services must be accompanied by the decentralisation of taxation because, otherwise, the amounts offered by the sub-central units may be inefficient. So if there are regional inequity in tax revenue (i.e. in per capita terms) and the decentralization level is high, horizontal transfers may be needed. If we assume that horizontal transfers are very difficult then we have a limit for fiscal decentralization. Moreover, horizontal transfers have two faces: a equality face, very known, but a significant efficiency face too. As some regions can collect more taxes than would correspond to them in terms of their actual economic situation, then the difference between real revenue (what is actually collected in the territory) and potential revenue (the taxable transactions taking place in the territory) will place limits on the capacity of economic decentralisation in terms of efficiency. We draw up an index to measure the intensity of this taxation shift from the perspective of both direct and indirect taxes and illustrate the problem within the framework of the Spanish case.
Submission Date: 13-05-2011 11:22

The International Transmission of Price Levels during the Classical Gold Standard Period: Evidence from the UK and the US
Tomoko Kinugasa
Fukumoto / Yukio Fukumoto
Recent studies have been interested in the economic situation during the classical gold standard period, which can be considered the first era of globalization. We examine the causal relationship regarding the establishment of the price levels of the UK and the US, which shared close economic ties and had notable presences in the world economy of the time, based on the causality test of the lag augmented vector autoregression (LA-VAR) model. We find that UK price level caused US price level whereas the reverse was not the case regardless of a variety of the specifications of the LA-VAR model.
Submission Date: 29-01-2008 00:00

Shifting the focus. New insights in the External sector-Led-Growth Behaviour for Argentina, Brazil, Chile and Mexico
Guadalupe FUGAROLAS Alvarez-ude
David Matesanz Gomez
This study re-examines the external sector and growth relationship for four Latin American countries firstly in the spirit of the trade framework built into the Thirlwall and Hussain model. We use the Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996) methodologies for testing Granger non-causality in vector autoregressive models that involve variables that are integrated of an arbitrary order and that are possibly cointegrated. We find evidence of an export-led growth causality model for Argentina, Brazil and Chile while Mexico shows an import-led export phenomenon. In addition, net capital flows are found to be essential explanations in the long run growth path for Argentina. This demand approach complements and shows different evidence in the spirit of the traditional Export-Led-Growth hypothesis.
Submission Date: 18-07-2011 15:40

Effects of Regulating Household loan on Korean Household Delinquency Ratios
Dong Jin Shin
Ehung Gi Baek
This paper uses Korean data to analyze whether regulations and monetary policy have contributed to controlling the financial fragility of household debt. The analysis shows that LTV and DTI regulations and a low interest rate policy lowered household delinquency ratios. We suggest that the government should lower household financial fragility and thus enhance the macroeconomic environment by appropriately applying the policy mix of the Bank of Korea’s monetary policy and the Financial Supervisory Service’s regulation policies. We also propose that the government establishes a board to coordinate the policy instruments of these two independent authorities.
Submission Date: 23-10-2011 19:00

The optimum share of government consumption expenditures in low and low-middle income countries: A threshold panel approach
Mehdi Hajamini
Mohammad Ali Falahi
This paper investigates the impact of government consumption spending as a share of GDP on economic growth in low and low-middle income countries. The impact of size of government on economic growth is similar to a hump-shaped curve which can be used to determine the optimum government size (see Barro, 1990; and Armey, 1995). In this study, 32 countries with low and low-middle income levels (according to the World Bank ranking in 2008) were selected during 1981-2007. Using threshold panel approach, the optimum share of government consumption expenditures for low and low-middle income countries was estimated to be 16.2% and 16.9%, respectively.
Submission Date: 21-06-2011 14:01

Some Aspects of the Chinese Industrialization
MURAT Ungor
I study the industrialization of China documenting some facts and developing a sectoral growth accounting exercise that links changes in sectoral productivity to the institutional reforms since 1978. I also examine the liberalization process of the Chinese foreign trade focusing on the changes in dynamic comparative advantage using both aggregated and disaggregated data.
Submission Date: 19-01-2012 07:21

Carbon tax or cap-and-trade: a computable general equilibrium analysis of Chinese economy
Yan Xu
This study analysed two hypothetical carbon dioxide (CO2) controlling measures in China: carbon tax and cap-and-trade, using a recursive dynamic computable general equilibrium (CGE) model. The simulation period is from 2002 to 2020. The main conclusions are: there is slight increase of Gross Domestic Product (GDP) under CAP scenarios, but over 3% GDP decrease in 2020 compared with baseline under TAX; carbon tax cases bring about smaller reduction in carbon emissions in 2020, but greater accumulated reductions for the total simulation years; ancillary co-benefit of carbon reduction actions on local environmental pollution can be observed.
Submission Date: 31-01-2012 04:22

Semi-endogenous growth theory versus fully-endogenous growth theory: a sectoral approach
Sara Barcenilla
Carmen López-Pueyo
Jaime Sanau
In the last two decades, endogenous growth theory has generated a second generation of models to solve the empirical paradoxes that arose from the first generation. These models are based on two theoretical approaches: semi-endogenous growth theory and fully-endogenous growth theory, each with different assumptions about technical progress, the main driver of economic growth. This paper offers, for the first time, an analysis of the validity of the aforementioned theories in a sectoral context, applying the most modern tests and estimation procedures for the treatment of panel data.
Submission Date: 28-10-2011 07:00

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 14:14

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 13:58

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 19:21

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 00:51

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 06:31

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

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

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

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 14:25

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 00:14

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

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 04:43

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 04:28

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 05:40

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 03:38

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 22:39

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 02:22

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 21:58

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

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 04:47

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

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 09:42

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 04:52

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 09:02

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 06:03

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

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 07:44

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 20:35

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 02:08

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 05:18

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 15:53

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 23:42

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 21:27

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 19:14

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 07:19

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 22:08

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

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 02:51

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

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 04:51

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 03:37

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 19:49

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 08:35

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 14:35

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 14:46

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 03:53

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 05:23

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

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 16:03

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 09:38

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 09:20

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

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 16:18

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

Submission Date: 30-11--0001 00:00

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 14:00

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 03:57

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

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 00:00

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: 30-11--0001 00:00

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

Submission Date: 27-01-2007 00:00

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 00:00

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

Submission Date: 29-08-2007 00:00

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 00:00

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 00:00

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 00:00

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 00:00

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: 30-11--0001 00:00

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 00:00

New Economy and Dollar Puzzle
Neil Karunaratne

Submission Date: 25-11-2001 00:00

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




Submission Date: 09-03-2009 00:00

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 00:00

Investment, Markup and Capacity Utilization in Tunisia
Riadh Ben Jelili

Submission Date: 28-05-2002 00:00

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 00:00

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 00:00

Financial Development and Money Demand in Tunisia
Adel Boughrara

Submission Date: 09-02-2002 00:00

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 00:00

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 00:00

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 00:00

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 00:00

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 00:00

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 00:00

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

Submission Date: 01-04-2002 00:00

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

Submission Date: 02-04-2002 00:00

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 00:00

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 00:00

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

Submission Date: 29-01-2007 00:00

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

Submission Date: 28-05-2002 00:00

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 00:00

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 00:00

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 00:00

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 00:00

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 00:00

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

Submission Date: 12-01-2003 00:00

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 00:00

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 00:00

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 00:00

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

Submission Date: 30-11--0001 00:00

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




Submission Date: 28-06-2009 00:00




Hot Subjects Archives

© 2014 - Society for Policy Modeling. All rights reserved.
Published by Elsevier Science Inc.