Showing papers on "Real gross domestic product published in 1993"

Losers and Winners in Economic Growth

Abstract: This paper examines the growth rates in 116 economies from 1965 to 1985. It finds that the lowest quintile had an average growth rate of real gross domestic product (GDP) per capita of -1.3 percent, whereas the highest quintile averaged 4.8 percent. The authors isolate five influences that discriminate reasonably well between slow and fast growers: a conditional convergence effect, whereby a country grows faster if it begins with lower real GDP per capita in relation to its initial level of human capital in the forms of educational attainment and health; a positive effect on growth from a high ratio of investment to GDP (although this effect is weaker than that reported in some previous studies); a negative effect from excessively large government; a negative effect from government-induced distortions of markets; and a negative effect from political instability. Overall, the fitted growth rates for eighty-five economies for 1965-85 had a correlation of 0.8 with the actual values. The authors also find that female educational attainment has a pronounced negative effect on fertility, whereas female and male attainment are each positively related to life expectancy and negatively related to infant mortality.

The Use of Monetary Aggregate to Target Nominal GDP

Abstract: This paper studies the possibility of using the broad monetary aggregate M2 to target the quarterly rate of growth of nominal GDP Our findings indicate that the Federal Reserve could probably guide M2 in a way that reduces not only the long-term average rate of inflation but also the variance of the annual rate of growth of nominal GDP An optimal M2 rule, derived from a simple VAR, reduces the mean ten-year standard deviation of annual GDP growth by over 20 percent Although there is uncertainty about this value because of both parameter uncertainty and stochastic shocks to the economy, we estimate that the probability that the annual variance would be reduced over a ten year period exceeds 85 percent A much simpler policy based on a single equation linking M2 and GDP is shown to be almost as successful in reducing this annual GDP variance Additional statistical tests indicate that M2 is a useful predictor of nominal GDP Moreover, a battery of recently developed tests for parameter stability fails to reject the hypothesis that the M2 - GDP link is stable, but the MI - GDP and monetary base - GDP relations are found to be highly unstable This evidence contradicts those who have argued that the M2 - GDP relation is so unstable in the short run that it cannot be used to reduce the variance of nominal GDP growth

Interest Rate Policy and the Inflation Scare Problem: 1979-1992

Abstract: monetary policy since the late 1970s is unique in the postKorean War era in that rising inflation has been reversed and stabilized at a lower rate for almost a decade. The current inflation rate of 3 to 4 percent per year, representing a reduction of 6 percent or so from its 1981 peak, is the result of a disinflationary effort that has been long and difficult. This article analyzes the disinflation by reviewing the interaction between Federal Reserve policy actions and economic variables such as the long-term bond rate, real GDP growth, and inflation. The period breaks naturally into a number of phases, with the broad contour of events as follows. A period of rising inflation was followed by disinflation which, strictly speaking, was largely completed in 1983 when inflation stabilized at around 4 percent per year. But there were two more “inflation scares” later in the decade when rising long-term rates reflected expectations that the Fed might once more allow

Further Results on the Macroeconomic Effects of AIDS: The Dualistic, Labor-Surplus Economy

Abstract: This article generalizes and extends the earlier analyses of Cuddington (1993) and Cuddington and Hancock (forthcoming) by incorporating the presence of underemployment and dual labor markets - considerations that seem particularly important when assesssing the likely impact of AIDS in many African countries. The dual-economy simulations of the economic impact of AIDS using Tanzanian data suggest that the macroeconomic consequences of the epidemic are of the same order of magnitude as those obtained using a single-sector, full-employment model: gross domestic product (GDP) is 15 to 25 percent smaller by 2010 than it would have been wtihout AIDS, and per capita GDP is 0 to 10 percent smaller. The output loss from AIDS in the dual-economy framework is roughly the same as the output gain achievable through policies designed to increase labor market flexibility. The exercise is crude, but it suggests that meaningful efforts at economic reform in economies devastated by AIDS may at least ameliorate some of the negative economic effects of the epidemic, although they would certainly not offset its personal and social costs.

A Comparative Analysis of the Major Determinants of Office Rental Values in Europe

Abstract: Presents an empirical investigation of office rental trends for some of the largest cities in Europe. Uses annual data for the period 1983‐91 to test the changes in rental values and fluctuations in economic activity. Includes a review of previous office market studies and an assessment of the research direction and information requirements of current European property research. Suggests that European rental values are determined by similar demand‐side variables and, in particular, real gross domestic product (GDP).

Growth and inflation: a cross-country study

Abstract: This paper examines the effect of inflation on real growth in a Solow growth model using data from a cross section of countries over a 30-year period. The advantage of using a theoretical model is that it reduces the risk that the results will reflect data-mining. The results suggest that the 5 percentage point reduction in inflation from the 1970s to the 1980s would increase the growth rate of real GDP per head by between 0.1 and 0.5 percentage point. This effect would be worth between 15 percent and 140 percent of one year's income. Even the lower of these projections would be larger than most estimates of the costs of bringing inflation down.

Money, output and stock prices in the UK: evidence on some (non)relationships

Abstract: The methodology of Granger's causality is used to investigate lead-lag relationships among the money supply, real output and stock prices in the UK The results suggest that (i) stock prices tend to lead the MS money supply, (ii) the monetary base tends to lead real GDP, (iii) stock prices tend to lead real GDP, (iv) there are feedback effects between money supply volatility and stock price volatility, (v) real GDP volatility tends to lead stock price volatility and (vi) that real GDP volatility leads the money supply

What do governments buy? The composition of public spending and economic performance

Abstract: The authors develop a simple analytical framework that shows how the composition of public spending affects economic growth. Distinguishing between productive and unproductive government spending (that which complements private sector productivity and that which does not), they show that increasing the share of productive spending leads to a higher steady-state economic growth rate. They use data from 69 developing countries over 20 years to determine which components of public spending are productive. They find that an increase in the share of current spending has positive and statistically significant effects on growth. Otherwise, the news is mainly negative. The relationship between the capital component of public spending and per capita growth is negative. The same is true of the share of spending on transport and communications. The shares spent on health and education have no significant impact, although parts of those shares - the parts spent on preventative care and"other education"- do. The results raise the question whether public spending actually leads to a flow of public goods and services.

Controlling inflation with an interest rate instrument

Abstract: In this paper we examine the effectiveness in controlling long-run inflation of feedback rules for monetary policy that link changes in a short-term interest rate to an intermediate target for either nominal GDP or M2 We conclude that a rule aimed at controlling the growth rate of nominal GDP with an interest rate instrument could be an improvement over a purely discretionary policy Our results suggest that the rule could provide better long-run control of inflation without increasing the volatility of real GDP or interest rates Moreover, such a rule could assist policymakers even if it were used only as an important source of information to guide a discretionary approach

Economic regress : concepts and features

Abstract: Different criteria for measuring economic regress show varying results. Alternative procedures involve parametric variations in the focal variable (such as real income, gross domestic product - GDP - or mortality rates), time stretch (long-run decline or persistent short-run crises such as famines), relativity (absolute decline as distinct from relative setbacks), and unit of aggregation (such as broad regions, countries, classes, genders, and income groups). For example, over the long term, absolute GDP per capita has declined in several countries, but mortality rates of children under age five have improved for each. Regress in under-five mortality can be assessed in relative terms (such as comparison with half the median improvement). There is some evidence of growing divergence in the space of these mortalities. The paper uses some of these perspectives to analyze the nature of economic regress, to identify some experiences in that direction, to comment on their causal antecedents, and to indicate the necessity for going beyond the intercountry picture (despite the usefulness of that picture). The need to supplement detailed economic diagnoses (such as a shortage of investment) with broader investigations of the political economy of civil wars and military governments, particularly in sub-Saharan Africa, emerges as one of the imperatives in this field.

The “real” chinese gross domestic product (gdp) for the pre‐reform period 1952–77

Abstract: This paper develops an econometric method based on the relationship between GDP and NMP to estimate an unknown Chinese GDP series of 1952–77 using recently available Chinese GDP data of 1978–90 and a reconstructed NMP series of 1952–90. In this manner, a long-term (1952–90) series of China's GDP has been obtained for long-term analyses. A reassessment of Chinese economic performance of 1952–90 using this series suggests that the paper's estimate provides a reasonable reflection of both the Chinese pre-and post-reform economic growth in terms of production structure, growth pattern and policy changes. A series of China's per capita GDP in U.S. dollars which is comparable to the World Bank's estimate for the early 1980s has also been obtained.

Social costs of the transition to capitalism : Poland, 1990-91

Abstract: The Polish stabilization program implemented in 1990 as part of the transition to capitalism entailed unexpectedly high social costs. The often unstated assumptions had been that since central planning was intrinsically inefficient, stabilization in Poland might be less costly in terms of lost output than it would have been in a market economy. The idea was that recession stemming from an overall decline in demand could be moderated by removing the administrative barriers that in a planned economy hindered the best deployment of resources. The results were the reverse of expectations. Unemployment reached 12 percent of the labor force by the end of 1991, and real incomes plummeted (by about 40 percent). An estimated 17 percent of the population lived in poverty in 1989. By 1991, that figure reached 34 percent. The poverty rate more than doubled for all social groups except pensioners, for which it remained stable. Large households, and children in particular, were especially affected. The poverty gap rose from an estimated 1.4 percent of GDP to 4.8 pecent. Existing evidence on income distribution shows that it did not change. There was a slight compression of income among farmers, which has also occurred in the past when real incomes declined, and possibly some wage-stretching among workers. What happened to the general welfare? Conclusive results are elusive. Personal consumption, overall decreased. Queuing also decreased, but utility gains from shorter lines were offset as real wages, and thus the opportunity cost of waiting declined. Real appreciation of the exchange rate raised dollar wages substantially and led to an upsurge in consumer imports, thus decreasing the utlility derived from the ownership of consumer durable.

Interest rate policy and the inflation scare problem: 1979-1992

Abstract: monetary policy since the late 1970s is unique in the postKorean War era in that rising inflation has been reversed and stabilized at a lower rate for almost a decade. The current inflation rate of 3 to 4 percent per year, representing a reduction of 6 percent or so from its 1981 peak, is the result of a disinflationary effort that has been long and difficult. This article analyzes the disinflation by reviewing the interaction between Federal Reserve policy actions and economic variables such as the long-term bond rate, real GDP growth, and inflation. The period breaks naturally into a number of phases, with the broad contour of events as follows. A period of rising inflation was followed by disinflation which, strictly speaking, was largely completed in 1983 when inflation stabilized at around 4 percent per year. But there were two more “inflation scares” later in the decade when rising long-term rates reflected expectations that the Fed might once more allow

The Cyclical Component in Brazilian GDP

Abstract: This paper presents an estimate of the cyclical component in Brazilian GDP obtained by allowing the trend component to follow a stochastic process. It also compares this estimate with a more naive one, obtained by forcing the trend to be deterministic. The main result this paper conveys is that the cyclical component in Brazilian GDP is very small, and hence almost all output fluctuations have been caused by long-run (real) factors.

Saving measures as economic growth indicators

Abstract: The decline of the U.S. saving rate during the 1980s and its potential impact on future economic growth has been the subject of considerable concern. The National Income Accounts (NIA) measures of saving are the empirical basis for the concern. However, the economics literature has soundly criticized the NIA concepts of saving and investment. Moreover, little evidence exists that the United States suffered a capital shortage during the 1980s, when it enjoyed its second longest peacetime economic expansion. This paper examines the relation of NIA and other saving measures to future real GDP. Findings indicate that no measurable relation exists between the lagged NIA saving measures and real GDP. However, findings also indicate a significant relation does exist between real GDP and the sum of personal saving from the flow-of-funds accounts plus an approximation of government saving for infrastructure purposes. Unlike the NIA saving rate, this constructed saving rate did not decline precipitously in the 1980s. Since the saving rate relevant to economic growth did not fall, the future of the U.S. economy might not be nearly so bleak as many assume.

The Yield Curve and Real Activity

Abstract: The financial press frequently suggest that the shape of yield curve reflects information about the prospects of the economy. This paper attempts to formalize the link between the yield curve and the real economic activity. A closed-form formula for the term structure of interest rates is derived. It is shown that the term structure embodies the market’s expectation about changes in the macroeconomic fundamental--the growth in real aggregate output of the economy. The paper then documents the use of bond market data for predicting GDP growth in the G-7 industrial countries. The results suggest that a simple measure of the slope of the yield curve, namely the yield spread, serves as a good predictor of future economic growth. The out-of-sample forecasting performance of the yield spread compares favorably with that of the alternative stock price-based model and a univariate time series (ARMA) model. One practical implication is that it may be useful to add some measure of the term structure to the list of

Australia, Japan and the OECD: GDP Rankings and Revealed Preference

Abstract: Data on volumes and prices of consumption and investment are used to compare Australian real GDP for 1990 with the other OECD countries. Australian consumption patterns, including leisure, and price structure are very different from most other countries and especially from those of Japan. The Australian bundle of consumption, investment and leisure is revealed preferred to that of Japan and a number of other countries which are conventionally ranked above Australia in comparisons of real GDP per capita at international prices.

International competitiveness of the private industry and the constraints to its development : the case of Morocco

Abstract: Morocco has made significant progress toward becoming a more open and efficient economy. Since the mid-1980s, its economic growth which has been fueled by strong private sector export growth in the textiles and agro-industries, has been impressive and commendable. If Morocco is to maintain this momentum, its private sector must be prepared to meet the challenge of an increasingly integrated world economy and strong competition from a number of rivals who are major players in the markets which are important to Morocco. This paper utilizes a methodology to assess Morocco's strengths and weaknesses in meeting the international competitive challenge in the future. The methodology incorporates quantitative data as well as qualitative information compiled through surveys of business leaders in Morocco and twelve of its competitors, Morocco ranks in the lowest competitiveness category, behind countries like Singapore, Korea, Malaysia, Spain, Thailand, Portugal, Mexico, and Turkey. The recent increase in manufactured exports has relied primarily on cheap labor and Morocco's proximity to traditional importers, which have helped offset factors that otherwise limit the country's capacity to compete with other exporters. The results of the competitiveness analysis indicate that Morocco must address a number of remaining policy, structural and institutional rigidities to support private industry development and improve its competitiveness, therefore increasing its ties with the European Community by entering the league of more successful developing countries.

Economic development and cooperation in the Middle East and North Africa

Abstract: This report presents the results of work undertaken by the World Bank at the request of the Multilateral Working Group on Regional Economic Development. It provides an overview of economic development and regional cooperation in the Middle East and North Africa, including a review of financial flows to the region as well as an analysis of the Occupied Territories. The report summarizes the economic performance of the region through the boom of the 1970s, the bust of the 1980s, and the aftermath of the Gulf crisis. It explores the scope for regional cooperation beginning with an assessment of the potential gains from intra-regional trade, labor migration, and capital flows. The critical domestic component of the strategy, a component that focuses on the need for higher levels of investment and for more productive investments than in the recent past, is outlined. The paper examines the extent to which this strategy is already being implemented in the region. Finally, the paper focuses on two issues -- first, the actions that the Working Group might undertake with respect to the regional projects and initiatives that have been identified, and second, within that framework, the actions that the Working Group might recommend to support the particular needs of the Occupied Territories.

Monetary policy and oil price shocks: empirical implications of alternative responses

Abstract: Large swings in the price of oil which have occurred during tha past two decades have substantially affected US inflation, unemployment and economic growth. In the light of those experiences, a debate has arisen over how monetay policy should respond. This study contributes to that debate by evaluating empirically the economy's performance under three realistic monetary policy response rules. By doing so, it advances what has largely been a theoretical discussion. The policy rules studied – money growth targets, nominal GDP growth targets and interest rate targets – are evaluated by estimating how closely the resulting economic outcomes approximate an ‘optimal’ outcome. The optimal outcome arises when the Fed follows a well-defined optimal response rule. Of the three strategies, a nominal GDP target is found to be mose desirable, while an interest rate target is least desirable.

A historical perspective on the 1989-92 slow growth period

Abstract: This article compares the 1990-91 recession and the surrounding period of unusually sluggish growth with earlier recessionary episodes. Using a variety of indicators, the author assesses the relative severity of the latest recession and identifies features that distinguish this period from its predecessors. He also gauges the economy's recent performance by tracking the deviation of real GDP from various estimates of its potential level.

Unemployment Components in the G7 Countries

Abstract: Absrract The increase in unemployment rates in the G7 countries is broken down into both labour supply and labour demand components. In no case is there a dominant source. Real GDP generally ranks first but does not account for more than a third of the overall changes. This finding shows that unemployment cannot be equated to negative employment since the labour force is generally increasing and volatile, mostly because of rising participation rates. Another reason why unemployment is not a reliable indicator of macroeconomic performance is that labour hoarding reduces employment response to output changes; this is especially true for Japan and Europe.

Stock Market Response to Unexpected Macroeconomic News; The Australian Evidence

Abstract: This paper provides empirical evidence on the relationship between unexpected changes in macroeconomic variables and Australian stock returns over the period 1980-1991. The results suggest that stock returns are positively correlated with any surprise news in the current account deficit, the exchange rate and growth rate of real GDP, and negatively correlated with surprise news about the inflation rate and interest rates. Stock returns are also positively correlated with the unexpected unemployment rate and negatively correlated to revisions in the expected unemployment rate. The results furthermore suggest that market portfolios can detect the impact of common economic shocks better than the portfolios of the two main subsectors of the market.

The Role of Money During the Recession in Australia in 1990-92

Abstract: What role did money play during the severe recession in Australia in 1990–92? A multivariate time-series model of the Australian economy is developed and the influence of each variable–including money–on real GDP is determined. A dramatic fall in the rate of monetary expansion during 1989 accounts for the severity of the recession. Indeed, the recession would have been even more serious without mitigating foreign factors. The Reserve Bank readjusted monetary policy in 1990 and there were no further adverse monetary shocks during the downward phase of the business cycle. The time-series technique employed is known as historical decomposition.

Trade Liberalisation and Financial Reforms: Chile 1973–83

Abstract: This paper discusses economic liberalisation with reference to Chilean experience with trade and financial liberalisation. There are several reasons why the Chilean case is of interest. First, the Chilean economy pursued two distinctly different development strategies. From the 1930s to the early 1970s the economy followed inward-looking strategies and from late 1973 onwards, outward-looking strategies with stabilisation. Secondly, the process of liberalisation after 1973 was considered to be a ‘pure monetarist strategy’ as the economy was following free market oriented policies under the guidance of the military government and Chicago-trained economists. Thirdly, given that trade and financial liberalisation in Chile followed the sequence suggested by economic theory, namely trade liberalisation followed by financial reforms, it is of interest to see whether the results were consistent with the predictions of the theory. Finally, the performance of the Chilean economy both during and after the liberalisation period contained some dramatic changes. The inflation rate reached 500 per cent during 1973 but fell to 10 per cent by 1981. After the liberalisation process changes in interest rates, real exchange rates and the demand for credit remained of great concern. Real GDP growth experienced dramatic changes: for many years it averaged 8 per cent but there were decreases of over 12 per cent in two separate years.

Macroeconomic framework for an oil-based economy : the case of Bahrain

Abstract: Bahrain's economy is characterized by producer and consumer subsidies and, possibly misaligned currency. These subsidies have resulted in lower savings rates than would be consistent with the country's endowment in oil and gas. In addition, the misaligned real exchange rate has encouraged imports, at the same time creating incentives biased against the non-oil tradable sectors. So, Bahrain's economy remains largely dependent on a rapidly depleting hydrocarbon resource base. The authors espouse a macroeconomic consistency framework to focus on the behavior of Bahrain's economy along two paths. Part one is based on the assumption that the government's present macroeconomic policy will continue. In that case, the solution exhibits bubbles - fiscal and current account imbalances that would be unsustainable over time. Meanwhile, real appreciation of the dinar would suppress non-oil exports. As a result, the need for foreign borrowing would be more pressing. In an attempt to restore the equilibrium, the government would need to contain aggregate demand by compressing imports and investment, thereby worsening the economic situation. Path two is based on a reform strategy that includes policies to raise the domestic savings rate, improve the fiscal situation (by rationalizing expenditures and introducing income taxes and cost recovery measures), and correct the misaligned exchange rate. The results show that the expenditure-switching effect of the exchange rate alignment would shift resources in favor of the tradable sectors. Non-oil GDP and exports would register high growth rates while economic diversification, in the context of a growing and more dynamic economy, would foster investment efficiency. This would help Bahrainis maintain a high standard of living as the oil income dries up, without too much loss of consumption for the present generation.