Capital goods imports and long-run growth: Is the Chinese experience relevant to developing countries?

In this paper, we analyze the role played by capital goods imports in the long-run growth of developing countries. We focus in the case of the Chinese economy in the last few decades. We find evidence that the ratio of imported to domestic capital goods, that is, the composition of investment, as well as the capital accumulation (both physical and human), was key determinants of the long-run growth rate of per capita GDP over the analyzed period. Furthermore, our results are also consistent with the hypothesis that the link between trade openness and long-run growth operates mainly through imports. This finding supports some recent developments of Schumpeterian models of growth, and the very specific economic policy recommendations arising thereof. In short, these models state that, in the early stages of growth, government intervention to encourage an investment-based strategy, with emphasis on large investment efforts and the adoption of foreign technology, could be an appropriate strategy for development.     

The long-run impact of inflation in South Africa

This paper evaluates the hypothesis of long-run super-neutrality of money (LRSN) within the context of the South African economy. The long-run impact of inflation on the interest rate and subsequently, output is estimated by employing a trivariate structural vector autoregression model, using quarterly data for the period of 1960:1 to 2010:1. The estimation results suggest that the hypothesis of LRSN cannot be rejected, thereby suggesting that monetary policy in South Africa cannot be used to solve the large and persistent unemployment problem in South Africa, which is understandable, since unemployment is inherently structural and is due to skills-shortage. This is further supported by our one of our other results which shows that significant long-run impact on output is obtained from technological improvements.     

Macroeconomic impact of public debt and foreign aid in Sri Lanka

Accumulation of public debt in Sri Lanka is raised significantly since the independence. It exceeded 100% of gross domestic products (GDP) in the late 1980s and the early 2000s. Although it has been declined in the recent past and becomes 79.3% of GDP in 2016; the high level of debt in a weak fiscal position of the small economy Sri Lanka is an issue of concern. In this backdrop, this paper examines the impact of public debt and foreign aid on income, price level and interest rate in Sri Lanka for the post-reform period. It is found that public debt in general and foreign debt, in particular, depresses income and stimulates price level. Domestic debt has some impact on the price level. On the other hand, foreign aid has a deleterious effect on both the income and price level. The foreign debt and aid have raised interest rate both in the short-run and in the long-run, while no significant impact of the domestic debt on interest rate is found. Based on these findings, the paper elaborates on some long-term measures for reducing the dependence on debt and aid in Sri Lanka.     

NAFTA and Mexico's current economic crisis: Short-run and long-run perspectives

Policy-makers in both Mexico and the U.S. reacted to the economic crisis which began in Mexico in December, 1994 as if it were a problem of short-run financial liquidity. The argument presented in this article is that Mexico's current crisis has its origins in long-standing, fundamental problems of the Mexican economy. These long-run problems include: massive external debt, a severely skewed income distribution, inadequate job creation, low productivity per worker and lack of investment in infrastructure. The short-run policy response will not address the long-run problems.     

Money, real output, and deficit effects of coffee booms in Colombia

This paper develops a Vector Error Correction (VEC) model and uses the recently developed technique of ‘generalized’ impulse response analysis to test the empirical relationships in the Colombian economy between coffee revenues and a set of macro variables. We find that coffee price (revenue) shocks have exerted an important influence on money growth, inflation, and real exchange rates, and the direction of these effects are in line with some of the predictions of traditional Dutch Disease type models. The major difference between our results and the results of Dutch Disease type models arise in the effects of coffee booms on real output. We find that in the time horizon of 5 years after the boom, real output has increased in response to the effects of the coffee boom. The finding that coffee booms can result in positive long-run output effects is an important finding since it contradicts the traditional conclusion of Dutch Disease type models which envision an adverse long-run effect on output. We also find that the long-run effect of coffee booms is to reduce both current account and government deficits. These results illustrate strikingly that the term “Dutch Disease” is an unfortunately pejorative term that obscures the fact that coffee booms need not be viewed as a “disease” but as an extraordinary opportunity to strengthen internal and external balances.     

Does inflation targeting matter for output growth? Evidence from industrial and emerging economies

This paper examines the effects of inflation targeting (IT) on output growth over the “globalization years” of 1986-2004. Employing static panel data methods that control for traditional growth determinants, trade openness and financial globalization, the paper finds that the adoption of a fully fledged IT regime results in higher output income per capita for industrial and emerging economies. However, under dynamic model specifications, the estimated long-run output impact of inflation targeting for emerging market economies is found to be lower than in the case of static models. We argue that this might be due to the long lags until the full effects of greater credibility are felt in the real economy and the fact that emerging market economies adopted the regime much later than industrial economies.     

Exploring the implications of different loan-to-value macroprudential policy designs

We evaluate the macroeconomic effects of changes in loan-to-value ratios in a multi-country model with financial frictions and a banking sector. Main findings suggest that a permanent LTV tightening in a small euro area economy leads to a long-run decline in lending to the private sector. The short-run impact depends crucially on the policy design, being less pronounced when the measure is phased-in. This is consistent with policy goals of curbing credit growth but avoiding an abrupt immediate contraction. A euro area wide measure implies larger long-run effects but the short-run recessionary impact is attenuated by the monetary policy response.     

Trade options for a small open economy: The different impact of Taiwan exports to China and to other countries

This study aims to explore advantageous trade arrangements for a small open economy. To discover the arrangement, the fundamental question to ask is how trade affects a small economy. Due to the differential factor mobility, the two main streams of trade theory—new economic geography and comparative advantage—make divergent predictions of trade effects. This study identifies the differences in factor mobility and distinguishes the differential impacts of exports to China and other countries on Taiwan’s manufacturing clusters. Using Taiwan’s 2006 and 2011 census data and trade statistics, this study applies the two-stage least squares method to test the differential impacts. The findings reveal that the growth in Taiwan’s exports to other countries significantly increased the employment level of manufacturing clusters in Taiwan. However, such effects have not been found for exports to China. The lack of response in Taiwan’s local employment to exports to China can be inferred as a short-term exhibition of the long-run core-periphery effect. The policy implication of this study is that trade involving low factor mobility is more beneficial than that involving high factor mobility for a small open economy. Thus, for a small economy, trade liberalization that will ‘not’ attract large factor outflows from the small economy is more desirable.     

The macroeconomics of Italy: a regional perspective

In this contribution we show that the dualistic nature of the Italian economy has been, and still is, crucial for the design of short- and long-run macroeconomic policies, concerning unemployment, income growth and public finance.We establish the seriousness of the dualistic process of Italian regional development using several approaches. We then considered the regional nature of the Italian unemployment and show that it has profound implications for short- and long-run policies. In particular, we find that an aggregate price–unemployment relationship must be rejected. Different values of equilibrium unemployment rates for the main macro-regions of Italy are found and short-run policy implications discussed. We then consider how this heterogeneity relates to the design of growth-promoting policies.Lastly, we present evidence in favor of the importance of the missing growth of the Italian southern regions for the evolution of the Italian public finance.     

Getting low educated and older people into work: The role of fiscal policy

Raising employment, in particular employment among older individuals and low educated individuals, stands high on the agenda of policy makers in many OECD countries. Increased sensitivity in recent years to rising inequality has made the challenge only larger. In this paper we evaluate alternative fiscal policy scenarios to face this challenge. We construct and use an overlapping generations model for an open economy where individuals differ not only by age, but also by innate ability and human capital. The model allows us to study effects on aggregate employment, per capita income and welfare, as well as effects for specific age and ability groups. We show that well-considered fiscal policy changes can significantly improve macroeconomic productive efficiency, without increasing intergenerational or intragenerational welfare inequality. Our results strongly prefer a reduction in the labor tax rate on older workers and on all low-wage earners, financed by an overall reduction in non-employment benefits. An alternative financing option is to raise the consumption tax rate. These results are to be seen as long-run effects for economies at potential output.     

社会信用失范的原因与对策

信用问题是建立和完善市场经济体系进程中的一个根本性问题。社会信用失范的主要原因在于信用内部性和外部性的诱导、信用法律法规不健全、教育的偏废和误导、政府的失信与角色错位。建立健全的信用激励与惩罚机制、制定和完善信用法律法规、普及信用教育以及规范政府角色和行为,是解决社会信用失范问题的基本途径。     

Stochastic trends in the long-run behavior of velocity: A new test of the institutional hypothesis

The institutional approach to the long-run behavior of velocity has been implemented through testing whether proxy variables for the process of monetization, the spread of commercial banking, the level of financial sophistication, and economic stability are related to movements in velocity. In this paper I argue that a valid test of this type requires that a distinction is made between trends and temporary fluctuations in velocity and the institutional proxies. When this distinction is taken into account, it appears that the long-run behavior of velocity is less easily explained by the institutional variables than previous tests suggested.     

Repercussions of exchange rate depreciation on the economy of Pakistan: Simulation analysis using macroeconometric model

Expansionary and contractionary effects of exchange rate shock in developing economies has been the subject of an extensive debate but the results are inconclusive. This study has been conducted to examine the repercussions of unexpected exchange rate depreciation in the Pakistan economy. Unlike the previous literature, this study utilizes a fairly large macroeconometric model constructed on the basis of Cowles Commission structural approach. The study explores that expansionary effect of exchange rate depreciation explained by the traditional theories of open economy macroeconomics persists only for one fiscal year but these theories don’t work in the long-run as contractionary phase starts in the subsequent years. Monetary and fiscal authorities are not neutral and contractionary policy is taken in response to depreciation which pushes the economy into recession. Stagflationary effects are clearly observed. However, improvement in foreign sector prolongs for a number of years and policy makers would have to face a trade-off between opposite response of output and current account balance. Hence, unexpected depreciation generates sharp cyclical fluctuations on demand which immediately transmit to supply side of the economy. In line with the views of “New Structuralists”, exchange rate depreciation may be considered as a source of shock rather than shock absorber in the case of Pakistan economy. Although this study is specifically estimated for the Pakistan economy, authors believe that their methodological contributions and results are of wider importance for policy makers in developing countries.     

Private saving determinants in European countries: A panel cointegration approach

This paper investigates the determinants of aggregate private saving in European countries employing panel data. The long-run saving function is estimated based on an extended lifecycle hypothesis taking into account the economic and demographic developments during this period. A long-run saving function sensitive to dependency ratio, old dependency ratio, liquidity, public finances, real disposable income growth, real interest rate and inflation is found to exist. The empirical evidence suggests the existence of a long-run saving function in Europe. The policy implications of such a relationship are presented.     

Trade openness and manufacturing growth in Malaysia

This study investigates the long-run relationship between trade openness and manufacturing growth and further assesses the causal relationship between these variables. Contrary to some scholars belief that at national level, openness does not contribute to growth in Malaysia, our sector specific analysis suggest otherwise. In this aspect, we believe that in any attempt to establish relationship between openness and growth, the analysis should be sector specific since it is more relevant as well as assures a meaningful insight for policy makers. The results suggest that in the long-run, trade openness is positively related to manufacturing growth in Malaysia. Furthermore, the results also suggest that openness should be viewed as the long term policy initiative for the sector to benefit. Therefore, the policy direction for Malaysian manufacturing sectors should focus on long term trade openness policies. Nevertheless, to ensure sustainability, emphasis should be placed on how (which manufacturing sub-sectors) or when openness is actually important. Importantly, policy makers and scholars should understand that leveraging the benefits of openness also depend on whether the liberalized sector has the comparative advantage.     

The US–China trade war and Phase One agreement

The Trump administration changed US trade policy toward China in ways that will take years for researchers to sort out. This paper makes four specific contributions to that research agenda. The first is to carefully mark the timing, definitions, and scale of the products subject to the tariff changes affecting US–China trade from January 20, 2017 through January 20, 2021. One result was each country increasing its average duty on the other to rates of roughly 20 percent, with the new tariffs and counter-tariffs covering more than 50 percent of bilateral trade. The second contribution is to highlight two additional channels through which bilateral tariffs changed during this period that received less research attention. One tariff change is through product exclusions, another is trade remedy policies of antidumping and countervailing duties. The third contribution is to provide an initial exploration into why China fell more than 40 percent short of meeting the goods purchase commitments set out under the first year of the Phase One agreement. The last contribution is to consider additional trade policy actions—involving forced labor, export controls for reasons of national security or human rights, and reclassification of trade with Hong Kong—likely to affect US–China trade beyond the Trump administration.     

Models of 'ordinary' and 'special' daily living: matching residential care to the mental-health needs of looked after children

This paper proposes a set of distinctions between ‘ordinary’ and ‘special’ modes of everyday living in residential settings for young people in the ‘looked after’ system. The paper begins by reviewing both quantitative and qualitative evidence on the mental‐health needs of the young people, arguing that there is evidence of very high levels of mental distress and disturbance within this group, and that this distress is often undiagnosed and untreated both by psychiatric professionals and within the residential care system itself. There follows a commentary on the tacit assumptions underpinning much residential practice, especially the emphasis in some policy and legal documentation on the young people’s need for ‘ordinary’ everyday experience. The concept of the ‘ordinary’ is problematized, and it is argued that while young people do need to be supported towards mainstream ‘ordinary’ everyday living, they also need specialized everyday care in which their emotional and psychological needs can be recognized and responded to. Four models of ‘special everyday living’ are proposed, based upon existing literature on residential practice, and it is argued that residential care programmes should be based upon a mix of these special and ordinary provisions if the young people’s emotional needs are to be met.     

透视市场经济中的非信用关系

信用危机愈演愈烈,非信用现象腐蚀经济链条,对我国市场经济发展会造成灾难性的影响。非信用关系的产生不但有观念、传统文化方面的原因,更为重要的原因是经济法制不健全、不完善。应转变信用观念,建立对社会集团、企业及个人等的信用评级机构,并加快信用法制化进程。     

McCarran-Ferguson Act reform: More competition or more regulation?

The antitrust exemptions provided by the McCarran-Ferguson Act are often identified as the cause of a variety of problems that have plagued the property-liability insurance industry in the last decade. In particular, proponents of repeal of the Act suggest that it has facilitated anticompetitive behavior by insurers, which in turn contributed to the liability and auto insurance crises of the 1980s. We examine industry structure, behavior, and performance and assess possible market imperfections that may justify price regulation and special antitrust treatment. We find that the major barrier to effective competition is state rate regulation rather than anticompetitive behavior. We examine evidence on the causes of the liability and auto insurance crises and conclude that they are readily explained by changes in market conditions and regulatory constraints rather than anticompetitive behavior. While there is no need for the broad antitrust exemptions contained in the Act, there is a danger that repeal will lead to more inefficient price regulation unless reform of the Act includes restrictions on state rate regulation. We propose reform legislation that both narrows the industry's antitrust exmption and promotes competition.     

Recurrent explosive public debts and the long-run fiscal sustainability

In this paper, the dynamics of debt-to-GDP ratio is analyzed for three countries with long fiscal records: Sweden, the UK and the US. A novel procedure of testing for recurrent explosive behavior is implemented in order to identify episodes of explosive debt dynamics. The detected periods of explosive debt growth can be attributed to changes in economic, political and institutional environment which required active policy responses subsequently followed by fiscal adjustments. The results of the study indicate that the long-run sustainability found for these countries in other studies can be interpreted as the outcome of fluctuating fiscal policies, some of which were unsustainable.