Effects of capital investment on international trade
Mossa Anisa Khatum
The aim of this paper is to show the effects of capital investment on international trade pattern for analyzing the Japan-US economy considering overlapping generation (OLG) and dynamic computable general equilibrium (CGE) concepts. For showing these effects, a dynamic international trade model is developed using seven period OLG concepts. Most of the previous works used two period OLG model where only investment policy is analyzed. But in this paper, seven period OLG model is used where investment as well as reinvestment policy is analyzed for consumers and firms. The effects of labor force and interest rate are also considered to analyze the trade pattern. The international input-output (IO) transaction tables for seven periods are used for analyzing Japan-US economy in details.
Submission Date: 2009-06-28 00:00:00

Welfare Effects of VAT Reforms: a general equilibrium analysis
Bye Brita
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: 2008-08-15 00:00:00

Optimal Monetary Policy for a Small Open Economy
Divino Jose Angelo
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: 2008-04-02 00:00:00

Optimal fiscal and tax policies in a general equilibrium model of growth
Economides George
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: 2008-04-02 00:00:00

Education and Growth at the industry-level: the Portuguese manufacturing sector
Simoes Marta C.N.
This paper investigates the education–growth link at the more disaggregate industry level in the Portuguese manufacturing sector with a focus on different levels of education using an augmented version of the Benhabib and Spiegel (1994) growth specification. We find that technology spillovers embodied in imports are crucial for productivity growth, as long as workers possess skills provided by secondary education. The Portuguese manufacturing sector cannot rely on automatic technological catch up for productivity growth so active trade and education policies are crucial to recover from the present bottom position in the rank of OECD productivity levels.
Submission Date: 2008-03-04 00:00:00

Interactions between Finance and Growth
Lin Shu-Chin
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: 2007-08-29 00:00:00

Regionalization, Changes in Home Bias, and the Growth of World Trade
Whalley John
In this paper we use numerical modeling methods to quantitatively assess the impacts of changes in home bias within regions on the growth of world trade among major blocs over the last three decades. Existing work focuses on the impacts of trade barrier, transport cost and income changes on trade growth, rather than preferences. Removing changes in home bias over the last three decades from our global general equilibrium model reduces world trade by 27% compared to actual world trade in 2004 in our central case scenario. These results support the view that world trade among major blocs has became more regionalized rather than internationalized which we suggest may be due to a proliferation of free trade agreements. We calibrate a simple global trade model of inter bloc trade to both 1975 and 2004 data and substitute different calibrated parameters from the two data sets between model parameterizations. Our results suggest that if changes over time in home bias involving different regionally sourced goods in a multi-region multi product model are removed, substantial effects follow for the growth of world trade in the last three decades. Home bias changes in developed and developing economies reduce world trade by 8% and 19% respectively, suggesting that regionalization is more pronounced in developing country trade. Our results indicate that income growth, income convergence, and falling trade costs explain 76%, 4%, and 7% respectively of the growth of world trade over the last three decades. The policy implications of our work are that barrier reduction (trade costs) is only a small factor in driving world trade growth and that home bias changes may dominate barrier reduction as a driver of world trade. This implies that in post Doha Round world of only weakened barrier reduction world trade can continue to grow if globalization (home bias mitigation) continues.
Submission Date: 2007-08-17 00:00:00

Convergence clubs: geography and technology
Tomkins Judith
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: 2006-09-25 00:00:00

Multi-stage overlapping generation approach
Anisa Khatum
The aim of this paper is to show the effects of capital investment on international trade pattern for analyzing the Japan-US economy considering overlapping generation (OLG) and dynamic computable general equilibrium (CGE) concepts. For showing these effects, a dynamic international trade model is developed using seven period OLG concepts. Most of the previous works used two period OLG model where only investment policy is analyzed. But in this paper, seven period OLG model is used where investment as well as reinvestment policy is analyzed for consumers and firms. The effects of labor force and interest rate are also considered to analyze the trade pattern. The international input-output (IO) transaction tables for seven periods are used for analyzing Japan-US economy in details.
Submission Date: 2005-10-01 00:00:00

Monetary stabilisation in a currency union: The role of catching up member states
Sanchez Marcelo
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: 2005-09-30 00:00:00

Optimal Patent Length in a North-South Framework: A comment
Banerjee Swapneddu
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: 2005-02-04 00:00:00

Rebuilding socio-economic impact measurement for public investment evaluation
Yang Ji Chung

Submission Date: 2004-11-17 00:00:00

Growth, Employment and Wage Formation
Sorolla Valeri
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: 2004-06-09 00:00:00

Purchasing power parity and economic integration among caribbean countries: Evidence from the 1980s and 1990s
Aggarwal Raj
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: 2002-05-28 00:00:00

An estimation of U.S. Industry-level Capital-Labor Substitution Elasticities: Cobb-Douglas as a Reasonable Starting Point?
Balistreri Edward
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: 2002-05-28 00:00:00

Effects of Trade Liberalization on Domestic Prices: The Evidence From Korea, 1983-1995
Yang Yung
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: 2002-04-17 00:00:00

Systematic risk in a mature, export oriented industry in a small open economy: The Canadian forestry industry
Sadorsky Perry
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: 2002-04-03 00:00:00

Seeking Information: The Role of Information Providers in the Policy Decision Process
Swank Otto H.
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: 2002-04-01 00:00:00

Poverty Alleviation Policies: The Problem of Targeting when Income is not Directly Observed
Fernandes Reynaldo
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: 2002-04-01 00:00:00

Wage versus Gross Markups and Dynamic Inconsistency: Evidence from a developing country
Erol Turan

Submission Date: 0000-00-00 00:00:00

The Poverty-Growth-Inequality Triangle Hypothesis: An Empirical Examination
Grammy Abbas P.

Submission Date: 0000-00-00 00:00:00

Consumption in urban China and monetary policy: evidence from the 1990s
Maneschiold Per-Ola
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: 0000-00-00 00:00:00