Showing papers on "Real gross domestic product published in 2004"

Tourism as a long-run economic growth factor: an empirical investigation for Greece using causality analysis

Abstract: This paper empirically examines the impact of tourism on the long-run economic growth of Greece by using causality analysis of real gross domestic product, real effective exchange rate and international tourism earnings A Multivariate Auto Regressive (VAR) model is applied for the period 1960:I-2000:IV The results of co-integration analysis suggest that there is one co-integrated vector among real gross domestic product, real effective exchange rate and international tourism earnings Granger causality tests based on Error Correction Models (ECMs), have indicated that there is a ‘strong Granger causal’ relationship between international tourism earnings and economic growth, a ‘strong causal’ relationship between real exchange rate and economic growth, and simply ‘causal’ relationships between economic growth and international tourism earnings and between real exchange rate and international tourism earnings

Import Demand Elasticities and Trade Distortions

Abstract: To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. Kee, Nicita, and Olarreaga modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices and GDP losses associated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States. This paper - a product of the Trade Team, Development Research Group - is part of a larger effort in the group to measure trade restrictiveness.

The Real Effects of Financial Integration

Abstract: Fluctuations in GDP are more synchronized internationally than fluctuations in Consumption, and they remain so even between financially integrated economies, where the ranking should in theory be the reverse. This paper shows this happens because correlations in GDP fluctuations rise with financial integration. Finance serves to increase international correlations in both consumption and GDP fluctuations, which explains the persistent gap between the two in the data. The positive association between financial integration and GDP correlation constitutes a puzzle, as theory suggests a negative relation if anything. Nevertheless, it prevails in the data even after the effects of finance on trade and specialization are accounted for.

Economic Growth, Poverty, and Household Welfare in Vietnam

Abstract: Viet Nam is an economic success story - it transformed itself from a country in the 1980s as one of the poorest in the world, to a country in the 1990s with one of the world's highest growth rates. With the adoption of a new market-oriented policies, Viet Nam averaged an economic growth rate of 8 percent per year from 1990 to 2000, a growth rate accompanied by a large reduction in poverty, stemming from significant increases in school enrollment, and a rapid decrease in child malnutrition. The book uses an unusually rich set of macroeconomic, and household survey data, to examine several topics: the causes of the economic turnaround, and prospects for future growth; the impact of economic growth on household welfare, as measured by consumption expenditures, health, education, and other socioeconomic indicators; and, the nature of poverty in Viet Nam, and the effectiveness of government policies, intended to reduce same. Although the country's past achievements are impressive, future progress is by no means ensured.

The case for GDP‐indexed bonds

Abstract: GDS-indexed bonds This paper seeks to revive the case for countries to insure against economic growth slowdowns by issuing bonds indexed to the rate of growth of GDP We show that GDP‐indexed bonds could provide substantial benefits in reducing the likelihood of default crises and allowing countries to avoid pro‐cyclical fiscal policies We simulate the effects of GDP‐indexed bonds under different assumptions about fiscal policy reaction functions and their output effects and find that they could substantially reduce the likelihood of debt/GDP paths becoming explosive The insurance premium would likely be small, because cross‐country comovement of GDP growth rates is low and cross‐country GDP growth risk is thus largely diversifiable for an investor holding a portfolio of GDP‐indexed bonds Potential obstacles to the emergence of a market for these bonds include the verifiability of GDP data, the trade‐off between insurance and moral hazard, and the need for liquidity Theory and past experience suggest that financial innovation often requires official intervention and its timing and form are difficult to predict We discuss institutional fixes and suggest an approach for attempting to start up a market — Eduardo Borensztein and Paolo Mauro

Oil Price Shocks and Real GDP Growth: Empirical Evidence for Some OECD Countries

Abstract: This paper assesses empirically the effects of oil price shocks on the real economic activity of the main industrialised countries. Multivariate VAR analysis is carried out using both linear and non-linear models. The latter category includes three approaches employed in the literature, namely, the asymmetric, scaled and net specifications. We find evidence of a non-linear impact of oil prices on real GDP. In particular, oil price increases are found to have an impact on GDP growth of a larger magnitude than that of oil price declines, with the latter being statistically insignificant in most cases. Among oil importing countries, oil price increases are found to have a negative impact on economic activity in all cases but Japan. Moreover, the effect of oil shocks on GDP growth differs between the two oil exporting countries in our sample, with oil price increases affecting the UK negatively and Norway positively.

Forecasting Quarterly German GDP at Monthly Intervals Using Monthly Ifo Business Conditions Data

Abstract: The paper illustrates and evaluates a Kalman filtering method for forecasting German real GDP at monthly intervals. German real GDP is produced at quarterly intervals but analysts and decision makers often want monthly GDP forecasts. Quarterly GDP could be regressed on monthly indicators, which would pick up monthly feedbacks from the indicators to GDP, but would not pick up implicit monthly feedbacks from GDP onto itself or the indicators. An efficient forecasting model which aims to incorporate all significant correlations in monthly-quarterly data should include all significant monthly feedbacks. We do this with estimated VAR(2) models of quarterly GDP and up to three monthly indicator variables, estimated using a Kalman-filtering-based maximum-likelihood estimation method. Following the method, we estimate monthly and quarterly VAR(2) models of quarterly GDP, monthly industrial production, and monthly, current and expected, business conditions. The business conditions variables are produced by the Ifo Institute from its own surveys. We use early in-sample data to estimate models and later out-of-sample data to produce and evaluate forecasts. The monthly maximum-likelihood-estimated models produce monthly GDP forecasts. The Kalman filter is used to compute the likelihood in estimation and to produce forecasts. Generally, the monthly German GDP forecasts from 3 to 24 months ahead are competitive with quarterly German GDP forecasts for the same time-span ahead, produced using the same method and the same data in purely quarterly form. However, the present mixed-frequency method produces monthly GDP forecasts for the first two months of a quarter ahead which are more accurate than one-quarter-ahead GDP forecasts based on the purely-quarterly data. Moreover, quarterly models based on purely-quarterly data generally cannot be transformed into monthly models which produce equally accurate intra-quarterly monthly forecasts.

Quarterly Real GDP Estimates for China and ASEAN4 with a Forecast Evaluation

Abstract: The growing affluence of the East and Southeast Asian economies has come about through a substantial increase in their economic links with the rest of the world, the OECD economies in particular. Econometric studies that try to quantify these links face a severe shortage of high-frequency time series data for China and the group of ASEAN4 (Indonesia, Malaysia, Philippines and Thailand). In this paper we provide quarterly real GDP estimates for these countries derived by applying the Chow‐Lin related series technique to annual real GDP series. The quality of the disaggregated series is evaluated through a number of indirect methods. Some potential problems of using readily available univariate disaggregation techniques are also highlighted. Copyright © 2004 John Wiley & Sons, Ltd.

Greenfield foreign direct investment and mergers and acquisitions - feedback and macroeconomic effects

Abstract: FDI flows to developing countries surged in the 1990s, to become their leading source of external financing. This rise in FDI volume was accompanied by a marked change in its composition: investment taking the form of acquisition of existing assets (M&A) grew much more rapidly than investment in new assets (“greenfield” FDI), particularly in countries undertaking extensive privatization of public enterprises. This raises two issues. First, is the M&A boom a one-time effect of privatization, or is it likely to be followed by a rise in greenfield investment? Second, do these two types of FDI have different macroeconomic causes and consequences – in relation to aggregate investment and growth? This paper focuses on establishing the stylized facts in terms of time precedence between both types of FDI, investment and growth, using annual data for the period 1987-2001 and a large sample of industrial and developing countries. We find that in all samples higher M&A is typically followed by higher greenfield investment, while the reverse is true only for developing countries. In industrial and developing countries alike, both types of FDI lead domestic investment, but not the reverse. Finally, neither type of FDI appears to precede economic growth in either developing or industrial countries, but FDI does respond positively to increases in the growth rate.

Sources of Growth in Sub-Saharan Africa

Abstract: Analysis of 1960-2002 data shows that average real GDP growth in sub-Saharan Africa was low and decelerated continuously before starting to recover in the second part of the 1990s. Growth was driven primarily by factor accumulation with little role for total factor productivity (TFP) growth. The recent pickup in economic growth was accompanied by an increase in TFP growth, namely in the group of countries whose IMF-supported programs were judged to be on track. Average annual growth in the region, at 3½ percent during 1997-2002, is less than half of the estimated growth needed to halve the fraction of population living below $1 per day between 1990 and 2015, one of the Millennium Development Goals.

An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth ∗ Discussion Paper 127 (revised)

Abstract: A range of monthly series are currently available giving indications of short-term movements in output in the United Kingdom. As the only available information, these indicators are routinely exploited in various ways although they only provide an incomplete picture of gross domestic product (GDP). The main aim of this paper is to suggest a formal and coherent procedure for grossing these monthly data up to represent the whole of GDP. Although the resultant estimates of GDP would be worse than those obtained by direct measurement, they should be more satisfactory than simply making an informal inference from whatever monthly data are available. Our examination of the efficacy of the method for estimation of the state of economic activity indicates a rather satisfactory outcome.

An Assessment of Bank of England and National Institute Inflation Forecast Uncertainties

Abstract: In February 1996 the Bank of England and the National Institute of Economic and Social Research significantly increased the amount of information they published about the uncertainty surrounding their central projections of inflation. In effect, and in different ways, they each began to publish a density forecast of inflation, that is, an estimate of the probability distribution of possible outcomes for future inflation. The Bank represented this graphically, as a set of forecast intervals covering 10, 20, 30, …, 90 per cent of the probability distribution, coloured red, of lighter shades for the outer bands. This was done for inflation forecasts up to eight quarters ahead, and since the distribution becomes increasingly dispersed and the intervals ‘fan out’ as the forecast horizon increases, the chart became known as the ‘fan chart’ (or, rather more informally, and noting its red colour, the ‘rivers of blood’). The National Institute represented the distribution as a histogram, in the form of a table reporting the probabilities of inflation falling in various ranges. These intervals, or ‘bins’ of the histogram, have changed from time to time; those used currently are: less than 1.5 per cent, 1.5 to 2.0 per cent, 2.0 to 2.5 per cent, and so on. The forecasts refer to the fourth quarters of the current and following years, and from the beginning have included not only inflation but also real GDP growth. Fan charts for real GDP growth first appeared in the Bank's Inflation Report in November 1997.

An aggregate import demand function for India: a cointegration analysis

Abstract: This paper investigates the behaviour of Indian aggregate imports during the period 1971–1995. In the empirical analysis of the aggregate import demand function for India, cointegration and error correction modelling approaches have been used. In the aggregate import demand function for India, import volume is found to be cointegrated with relative import price and real GDP. The econometric estimates of the import-demand function for India suggest that import-demand is largely explained by real GDP, and is generally less sensitive to import price changes. Import liberalization is found to have had little impact on import demand.

The effect of entrepreneurship on national economic growth: an analysis using the GEM database

Abstract: The increased importance of knowledge as a source of competitiveness for modern economies suggests that the organization of industries most conducive to innovative activity and unrestrained competition will be linked to higher growth rates. Entrepreneurial activity is generally assumed to be an important aspect of this organization. In the present paper we investigate whether a new and promising concept, Total Entrepreneurial Activity, influences GDP growth for 36 countries in a recent period. We will also test whether this influence depends upon the level of economic development measured as GDP per capita. With this test we aim to investigate to what extent the role of entrepreneurship has changed in the last decades of the 20 th century. Although the limited number of observations does not allow for many competing explanatory variables, we will examine the role of the so-called Growth Competitiveness Index. This variable captures a range of alternative explanations for achieving sustained economic growth. In addition, we incorporate the initial level of economic development to correct for convergence. We find that entrepreneurial activity indeed affects economic growth, but that this effect depends upon the level of per capita income. This suggests that entrepreneurship plays a different role in countries in different stages of economic development. JEL-CODES: L16, M13

Evolving Post-World War II U.K. Economic Performance

Abstract: In this paper we use tests for multiple structural breaks at unknown points in the sample, and band-pass filtering techniques, to investigate changes in U.K. economic performance since the end of World War II. Empirical evidence suggests that the most recent decade, associated with the introduction of an inflation targeting regime, has been significantly more stable than the previous post-WWII era. Both for real GDP growth, and for three measures of inflation, we identify break dates around the time of the introduction of inflation targeting, in October 1992. For all four series, the estimated innovation variance over the most recent sub-period is the lowest of the post-WWII era. The volatility of the band-pass filtered macroeconomic indicators we consider is, after 1992, almost always lower than either during the Bretton Woods regime, or over the 1971-92 period, often, like in the case of inflation and real GDP, markedly so. The Phillips correlation appears to have undergone significant changes over the last 50 years, from being unstable in the 1970s, to slowly stabilising from the beginning of the 1980s onwards. After 1992, the correlation exhibits, by far, the greatest extent of stability of the post-WWII era.

Human Capital, Exports, and Economic Growth: A Causality Analysis for Taiwan, 1952-1995

Abstract: By using cointegration and error-correction representation methodology, this paper tested the causal relationship among human capital accumulation, exports, and economic growth using data pertaining to Taiwan's real GDP, real exports, and higher education attainment over the period 1952-95. The main findings of the paper are that human capital accumulation fosters growth and stimulates exports, while exports promote long-run growth by accelerating the process of human capital accumulation. Taiwan's case study thus supports the human capital-based endogenous growth theory and the export-led growth hypothesis.

Evolving post-World War II UK economic performance

Abstract: This paper uses tests for multiple structural breaks at unknown points in the sample period, and band-pass filtering techniques, to investigate changes in UK economic performance since the end of World War II. Empirical evidence suggests that the most recent decade, associated with the introduction of an inflation-targeting regime, has been significantly more stable than the previous post-WWII era. For real GDP growth, and for three measures of inflation, break dates are identified at around the time of the introduction of inflation-targeting, in October 1992. For all four series, the estimated innovation variance over the most recent subperiod has been the lowest of the post-WWII era. The volatility of the band-pass filtered macroeconomic indicators considered has been, after 1992, almost always lower than either during the Bretton Woods regime or the 1971-92 period; often, as in the cases of inflation and real GDP, markedly so. The Phillips correlation appears to have undergone significant changes over the past 50 years, from being unstable in the 1970s, to slowly stabilising from the beginning of the 1980s onwards. After 1992, the correlation has exhibited by far the greatest degree of stability during the post-WWII era.

New Zealand necessity entrepreneurs

Abstract: The necessity entrepreneur (NE) is someone who never considered starting or owning a business until there was no other option. Using the methodology of the global entrepreneurship monitor, this paper examines New Zealand necessity entrepreneurs in the light of propositions cited in the literature that NE is associated with three factors: 1 positively with economic growth (real GDP growth rate) 2 positively with unemployment (unemployment rate) 3 negatively with a generous welfare system (expenditures on social security). Factor 1 is confirmed through the GEM data; Factors 2 and 3 are not supported by the data. Immigration is seen as a possible contributory factor to the moderately high NE rates in New Zealand. In addition, unique characteristics of migrant necessity entrepreneurs pave ways for initiatives and intervention by local governments.

Fiscal federalism and economic performance: evidence from Swiss cantons

Abstract: The advantages and disadvantages of fiscal federalism are widely discussed in economics and political science. While some authors argue that federalism favors individual initiatives and serves as a market preserving device, others emphasize the dangers arising from an increasing corruption and local capture due to decentralization. In this paper, we empirically study the impact of different instruments of fiscal federalism on economic performance measured by GDP per capita using panel data for the 26 Swiss cantons from 1980 to 1998. In our econometric production function approach, the impact of fiscal federalism, tax competition and grants on economic performance is analyzed by additionally using controls for physical and human capital investment as well as further controls and indicators of fiscal federalism. According to our results, the intensity of tax competition, which is measured by the difference between a cantons tax rate and the average of its neighbors’ tax rates, is at least not harmful for economic performance. Moreover, the fragmentation of cantons in communities does not affect real GDP per capita indicating that economies of scale do not necessarily provide a good argument for a merger of communities.

Asymmetric Interest Rate Effects for the UK Real Economy

Abstract: Recent literature has uncovered asymmetries in the response of real output to monetary policy variables. Nevertheless, it remains unclear whether such asymmetries relate to different responses to monetary policy or to the business cycle. This paper uses nonlinear models to examine the issues in the context of interest rate effects on quarterly UK GDP growth. Strong evidence of nonlinearity is found, with asymmetry relating to the business cycle through lagged GDP regimes and interest rate changes. The results suggest that interest rate effects on GDP are larger when either lagged growth has been high or when interest rates have substantially increased in the past. However, the inclusion of interest rate regimes without taking account of GDP regimes yields an unsatisfactory model.

Export-led growth, growth-driven export, both or none? granger causality analysis on oecd countries

Abstract: This paper investigates the possibility of export-led growth and growth-driven export by testing for Granger causality between the logarithms of real exports and real GDP in twenty-five OECD countries. Two complementary testing strategies are applied. First, depending on the time series properties of the data, causality is tested with Wald tests within finite-order vector autoregressive (VAR) models in levels and/or in first-differences. Then, with no need for pre-testing, a modified Wald procedure is used in augmented level VAR systems. In both cases we experiment with alternative deterministic trend degrees. The results indicate that there is no causality between exports and growth (NC) in Luxembourg and in the Netherlands, exports cause growth (ECG) in Iceland, growth causes exports (GCE) in Canada, Japan and Korea, and there is twoway causality between exports and growth (TWC) in Sweden and in the UK. Although with less certainty, we also conclude that there is NC in Denmark, France, Greece, Hungary and Norway, ECG in Australia, Austria and Ireland, and GCE in Finland, Portugal and the USA. However, in the case of Belgium, Italy, Mexico, New Zealand, Spain and Switzerland the results are too controversial to make a simple choice.