Showing papers on "Real gross domestic product published in 1986"

The three faces of the international comparison project

Abstract: Purchasing power parities (PPPs) are the correct converters for translating gross domestic product (GDP) and its components from own-currencies to dollars; the alternative measure, exchange rates, obscures the relationship between the quantity aggregates of different countries. Drawing on the reports of the United Nationals International Comparison Project (ICP), the article contends that exchange rates systematically understate the purchasing power of the currencies of low-income countries and thus exaggerate the dispersion of national per capita incomes. Where full-scale PPP estimates are not available, estimates based on shortcut methods better approximate what the benchmark estimates would be than do the exchange rate conversions. The ICP results also illuminate price and exchange rate relationships among countries by providing a measure of the difference in the levels of prices in different countries. ICP price comparisons for components GDP make possible the analysis of comparative price and quantity structures of different countries and provide the raw materials for many types of analytical studies.

Monetary Policy Responses to Exogenous Shocks

Abstract: The oil-price shocks of 1973-74 and 1979-80 reduced output growth in oil-importing countries. Using monetary policy to accommodate exogenous shocks of this kind undoubtedly works. But the more such monetary policy is used, the less effective it becomes. And discretionary monetary policy has a negative effect on economic growth in the long run. This is how we interpret the econometric results reported below. We find that money is neutral neither in the medium term nor in the long run. The effects of current and lagged money growth shocks on output growth are significantly positive. Over time, however, discretionary monetary policy creates a higher variance of money growth shocks. The period-average variance of money growth shocks together with our indicator of an accommodative monetary policy regime are both negatively related to the rate of growth in real gross domestic product (GDP). Higher variance of money growth shocks reduces both the medium-term impact of discretionary monetary policy on output growth and output growth itself in the long run (see Robert Lucas, 1973, and Roger Kormendi and Philip Meguire, 1984, 1985). The only way of testing both the mediumand long-run effects of discretionary monetary policy is by pooling time-series data across countries; we use 647 observations for 55 developed and developing countries. We believe this to be the first appropriate test. Monetary accommodation of exogenous shocks, specifically accommodation of the 1973-74 oil-price increase, works temporarily to offset the output growth-reducing impact of the shock. However, accommodation adds noise to the economic environment and reduces output growth in the longer run. Indeed, we find that our monetary accommodation variable performs in virtually the same way as the variance of money growth shocks. Expansionary fiscal policy has mediumand long-run effects on output growth that are similar to monetary accommodation. Specifically, expansionary fiscal policy raises the ratio of net government credit to total domestic credit in countries lacking well-developed direct financial markets. In the medium term, a positive government credit shock raises output growth by stimulating aggregate demand. But a higher government credit ratio lowers output growth in the long run by starving the private sector of finance for productive investment.

Long-Run Expenditure Constraints in Argentina

Abstract: This article attempts to identify and empirically assess the economic, monetary, financial, and institutional/political factors associated with the behavior of Argentine public expenditures over the 1930-1977 period. Using multiple regression techniques and functional and economic classifications of govern ment spending, explanations are sought regarding the constancy of the secular overall expenditure to GDP ratio and with respect to the changing composition of total outlays. Real per capita GDP and deficit financing exerted an upward pull on the expenditure/GDP ratio, whereas tax revenue constraints and nonelected governments operated m the opposite direction.

The distributional impact of economic growth and decline in Egypt

Abstract: A growing body of evidence for the past two decades suggests that in many developing countries the benefit of economic growth has not been equitably distributed. In reaction to these findings, the main concern in development economics has been the nature of the income distribution and other measures of welfare. While there is some disagreement about the desired degree of overall equality, there is uniform concern about the need to improve the position of the poorest members of society.' As a result, the general feeling is that planners in developing countries ought to worry mainly aboutpoverty and unemployment and that success in dealing with these social problems would result in an adequate overall rate of growth.2 The underlying presumption is that social equity and economic growth are complementary objectives.3 The purpose of this paper is to analyse the experience of a developing country, Egypt, which since the late 1950s has committed itself to a development process aimed primarily at guaranteeing the equal distribution of income and increasing national income. This concern with equality and the social aspects of Egyptian economic development has so far produced too little evidence to evaluate the success or failure of past policies.4 Here I attempt to analyse Egyptian time-series data on the income distribution, beginning in the late 1950s and stretching into the 1970s. During the first part of this period (1958-64) Egypt achieved a substantial rate of growth by the standards of less developed countries, real private consumption increasing by 26 per cent. In the next decade, although real gross domestic product grew by over two per cent per annum, private consumption declined by six per cent. Since the population increased by 21 per cent over this decade, per capita private consumption declined by 27 per cent. In this article I examine the distributional impact of economic growth during the period 1958-74. The analysis centers on the fundamental question: who (as classified by income) received what share of the proceeds of economic growth? In answering this question I follow Fields 5 in adopting an absolute income approach and comparing the results with measures of relative income inequality and Lorenz curves. The methodology used is basically that used by Fields in studying Brazil, including the calculation of the decomposition measures developed by him to show how income growth affects the poor. The present work differs from his analysis in the use of the household rather than individual recipients, the correction of the distribution of income among households for differences in family size, the method used to compute the mean income of the poor and non-poor, and the decomposition of the change in mean income into the parts attributable to

Indonesia´s Economy: Performance and Policy Options in a Post-OPEC World

Abstract: For several years, students of the Indonesian economy, both Indonesian and foreign, have been debadng the impact on the country's development prospects of declining world oil prices. From the late 1960s to 1981, receipts from exports of crude petroleum, refined products and natural gas rose steadily until in 1981 they amounted to over USS20 billion. In 1982 they fell by over USS2 billion; in that year there was also a dramatic slump in economic growth with real gross domestic product (GDP) rising by only 2 per cent, the lowest annual growth rate since 1967. There was widespread concern that the high growth rates of the 1970s were past history and could not be sustained in the much harsher international environment of the 1980s1. When Repelita IV (the Fourth Five-Year Plan which began in April 1984 and runs to March 1989) announced an annual GDP growth target of 5.0 per cent, many considered that this would be difficult to achieve, even though the average annual rate of GDP growth in the 1970s had been close to 8 per cent. In particular, scepticism was expressed about the ambitious annual growth target for the industrial sector of 9.5 per cent, given the slow growth in that sector since 1981. Not surprisingly, the faltering pace of economic progress in Indonesia since 1981, combined with the more uncertain international environment, has given rise to considerable debate over economic policy. Both the younger generation of university academics and veterans such as former Finance and Trade Minister Professor Sumitro Djojohadikusumo have had much to say over the past two years on the appropriate role of government in the economy, especially in such crucial areas as industrial regulation and the foreign trade regime. Many of the arguments they have been putting forward have in turn been much influenced by international thinking on development issues, especially in the international development agencies such as the World Bank. But before looking at these policy debates in greater detail, it will be useful to highlight the nature of the economic transition which took place in Indonesia in the momentous years from the late 1960s to the early 1980s.

A Supply Side Analysis of the Laffer Hypothesis

Abstract: Using a good procedure and internationally comparable data for the period 1950-80 in respect of sixty-three countries, an investigation is conducted of Granger causality between (1) GDP per capita and share of general government in GDP and (2) GDP per capita and government expenditure per ca pita Although much variation is observed in the patterns of causality across various countries, a rough generalization would seem to be that very limited support is found for the direction of causality implicit in Adolph Wagner's (1890) hypothesis, and support is also lacking in most cases for the causal order implied by several common macroeconomic models