Showing papers on "Real gross domestic product published in 2007"

Accounting for the Effect Of Health on Economic Growth

Abstract: I use microeconomic estimates of the effect of health on individual outcomes to construct macroeconomic estimates of the proximate effect of health on GDP per capita. I employ a variety of methods to construct estimates of the return to health, which I combine with cross-country and historical data on height, adult survival rates, and age at menarche. Using my preferred estimate, eliminating health differences among countries would reduce the variance of log GDP per worker by 9.9 percent and reduce the ratio of GDP per worker at the 90th percentile to GDP per worker at the lOth percentile from 20.5 to 17.9. While this effect is economically significant, it is also substantially smaller than estimates of the effect of health on economic growth that are derived from cross-country regressions.

Global Growth Opportunities and Market Integration

Abstract: We propose an exogenous measure of a country’s growth opportunities by interacting the country’s local industry mix with global price to earnings (PE) ratios. We find that these exogenous growth opportunities predict future changes in real GDP and investment in a large panel of countries. This relation is strongest in countries that have liberalized their capital accounts, equity markets, and banking systems. We also find that financial development, external finance dependence, and investor protection measures are much less important in aligning growth opportunities with growth than is capital market openness. Finally, we formulate new tests of market integration and segmentation by linking local and global PE ratios to relative economic growth. IN A PERFECTLY INTEGRATED WORLD economy, capital should be invested where it

The growing relationship between China and Sub-Saharan Africa : macroeconomic, trade, investment, and aid links

Abstract: China’s economic ascendance over the past two decades has generated ripple effects in the world economy. Its search for natural resources to satisfy the demands of industrialization has led it to Sub-Saharan Africa. Trade between China and Africa in 2006 totaled more than $50 billion, with Chinese companies importing oil from Angola and Sudan, timber from Central Africa, and copper from Zambia. Demand from China has contributed to an upward swing in prices, particularly for oil and metals from Africa, and has given a boost to real gross domestic product (GDP) in Sub-Saharan Africa. Chinese aid and investment in infrastructure are bringing desperately needed capital to the continent. At the same time, however, strong Chinese demand for oil is contributing to an increase in the import bill for many oil-importing Sub- Saharan African countries, and its exports of low-cost textiles, while benefiting African consumers, is threatening to displace local production. China poses a challenge to good governance and macroeconomic management in Africa because of the potential Dutch disease implications of commodity booms. China presents both an opportunity for Africa to reduce its marginalization from the global economy and a challenge for it to effectively harness the influx of resources to promote poverty-reducing economic development at home.

Tourism's Impact on Long-Run Mexican Economic Growth

Abstract: Tourism is one of the most important factors in the productivity of the Mexican economy with significant multiplier effects on economic activity. This paper investigates possible causal relationships between tourism expenditure, real exchange rate and economic growth by using quarterly data. Johansen co-integration analysis shows the existence of one cointegrated vector among real GDP, tourism expenditure, and real exchange rate where the corresponding elasticities are positive. The tourism-led growth hypothesis is confirmed through cointegration and causality testing. Expenditure is weakly exogenous to real GDP producing a more than proportional effect in growth (it means real GDP increases 60% more when expenditure in tourism is increased). Short-run Granger causality shows that causality goes from expenditure to GDP, and there is a bidirectional short-run causality between real exchange rate and real GDP. Impulse response analysis shows that a shock in expenditure produce a continuous positive effect on growth while a shock in real exchange rate produces first a negative effect and then a positive one.

Money Market Pressure and the Determinants of Banking Crises

Abstract: This article develops an index of money market pressure to identify banking crises. We define banking crises as periods in which there is excessive demand for liquidity in the money market. We begin with the theoretical foundation of this new method. With the newly defined crisis episodes, we examine the determinants of banking crises using data complied from 47 countries. We find that slowdown of real GDP, lower real interest rates, extremely high inflation, large fiscal deficits, and over-valued exchange rates tend to precede banking crises. The effects of monetary base growth on the probability of banking crises are negligible.

Unleashing India's Innovation: Toward Sustainable and Inclusive Growth

Abstract: India's recent growth has been impressive, with real GDP rising by over eight percent a year since 2004 -- accompanied by a jump in innovative activities. Growth has been driven by rapid expansion in export-oriented, skill-intensive manufacturing and, especially, skill-intensive services. The book is structured as follows: Chapter 1 reviews the Indian context and enabling environment. Chapter 2 analyzes knowledge creation and commercialization. Chapter 3 discusses knowledge diffusion and absorption. Chapter 4 encourages inclusive, pro-poor innovation. Chapter 5 addresses the need for stronger skills and education for innovation. Chapter 6 examines ways of improving information infrastructure. Chapter 7 suggests approaches to enhance innovation finance.

U.S. Evolving Macroeconomic Dynamics: A Structural Investigation

Abstract: We fit a Bayesian time-varying parameters structural VAR with stochastic volatility to the Federal Funds rate, GDP deflator inflation, real GDP growth, and the rate of growth of M2. We identify 4 shocks-monetary policy, demand non-policy, supply, and money demand-by imposing sign restrictions on the estimated reduced-form VAR on a period-by-period basis. The evolution of the monetary rule in the structural VAR accords well with narrative accounts of post-WWII U.S. economic history, with (e.g.) significant increases in the long-run coefficients on inflation and money growth around the time of the Volcker disinflation. Overall, however, our evidence points towards a dominant role played by good luck in fostering the more stable macroeconomic environment of the last two decades. First, the Great Inflation was due, to a dominant extent, to large demand non-policy shocks, and to a lower extent to supply shocks. Second, imposing either Volcker or Greenspan over the entire sample period would only have had a limited impact on the Great Inflation episode, while imposing Burns and Miller would have resulted in a counterfactual inflation path remarkably close to the actual historical one. Although the systematic component of monetary policy clearly appears to have improved over the sample period, this does not appear to have been the dominant influence in post-WWII U.S. macroeconomic dynamics.

Supply-leading versus Demand-following Hypothesis: Empirical Evidence from Three SSA Countries

Abstract: This study investigates empirically the direction of causality between financial development and economic growth in three sub-Saharan African countries — Kenya, South Africa and Tanzania. The study seeks to answer one critical question: Does financial development in sub-Saharan African countries exhibit a supply-leading or demand-following response? Using three proxies of financial development against real GDP per capita (a proxy for economic growth), the study finds that the direction of causality between financial development and economic growth is sensitive to the choice of measurement for financial development. In addition, the strength and clarity of the causality evidence is found to vary from country to country and over time. On balance, a demand-following response is found to be stronger in Kenya and South Africa, whilst in Tanzania a supply-leading response is found to be dominant. The study therefore recommends that for Kenya and South Africa the real sector of the economy should be developed further in order to sustain the development of the financial sector. However, for Tanzania, there is need for further development of the financial sector in order to make the economy more monetized.

Export and economic growth in namibia: a granger causality analysis

Abstract: The purpose of this paper is to analyse the causality between exports and GDP of Namibia and to evaluate the relationship of these variables for the period 1970 to 2005. Time-series econometric techniques (Granger causality and cointegration) are applied to test the hypothesis of a growth strategy led by exports. It tests whether export Granger causes GDP, or whether the causality runs from GDP to exports, or if there is bi-directional causality between exports and GDP. The results revealed that exports Granger cause GDP and GDP per capita. This suggests that the export-led growth strategy through various incentives has a positive influence on growth.

Total work, gender and social norms

Abstract: Using time-diary data from 25 countries, we demonstrate that there is a negative relationship between real GDP per capita and the female-male difference in total work time per day -- the sum of work for pay and work at home. In rich northern countries on four continents, including the United States, there is no difference -- men and women do the same amount of total work. This latter fact has been presented before by several sociologists for a few rich countries; but our survey results show that labor economists, macroeconomists, the general public and sociologists are unaware of it and instead believe that women perform more total work. The facts do not arise from gender differences in the price of time (as measured by market wages), as women's total work is further below men's where their relative wages are lower. Additional tests using U.S. and German data show that they do not arise from differences in marital bargaining, as gender equality is not associated with marital status; nor do they stem from family norms, since most of the variance in the gender total work difference is due to within-couple differences. We offer a theory of social norms to explain the facts. The social-norm explanation is better able to account for within-education group and within-region gender differences in total work being smaller than inter-group differences. It is consistent with evidence using the World Values Surveys that female total work is relatively greater than men's where both men and women believe that scarce jobs should be offered to men first.

Procyclicality or Reverse Causality

Abstract: There is a large literature showing that fiscal policy is either acyclical or countercyclical in industrial countries and procyclical in developing countries. Most of this literature is based on OLS regressions that focus on the correlation between a fiscal variable (usually the budget balance or expenditure growth) and either GDP growth or some measure of the output gap. This paper argues that such a methodology does not permit the identification of the effect of the business cycle on fiscal policy and hence cannot be used to estimate policy reaction functions. The paper proposes a new instrument for GDP growth and shows that, once GDP growth is properly instrumented, procyclicality tends to disappear.

Measuring the Impact of Tourism on Economic Growth

Abstract: This paper presents a methodology for measuring the contribution of tourism to an economy's growth, which is tested with data for Cyprus, Greece and Spain. The authors use the growth of real GDP per capita as a measure of economic growth and disaggregate it into economic growth generated by tourism and economic growth generated by other industries. The methodology is compared with other existing methodologies; namely, Tourism Satellite Account, Computable General Equilibrium models and econometric modelling of economic growth.

Does the Euro-zone diverge? A stress indicator for analyzing trends and cycles in real GDP and inflation

Abstract: This paper presents a stress indicator for the Euro-zone that summarizes developments of trends and cycles in real GDP and inflation in the member countries. Stress in a country is defined as the difference between the country’s actual short-term interest rate and the interest rate that would prevail if that country was able to follow an \"optimal\" monetary policy. The optimal monetary policy rule corresponds to the policy rule that was adopted by the country in the pre-EMU period and depends on the trend growth rates of GDP and consumer prices as well as on the related cyclical components. The main results are that stress in the Euro-zone is mainly due to different trend growth rates and that for most of the Euro-zone countries interest rates have been too low over the 1999-2005 period. Stress in Germany is close to zero, implying that the ECB continues the policy of the Bundesbank.

Retail Energy Prices and Consumer Expenditures

Abstract: In the absence of a major disruption in spending by consumers and firms, the effects of energy price shocks on the economy will be small. In this paper, we quantify the direct effect on real consumption of (1) unanticipated changes in discretionary income, (2) shifts in precautionary savings, and (3) changes in the operating cost of energy-using durables. We also evaluate the evidence for asymmetries in the response of real consumption that would be expected, for example, if shifting expenditure patterns cause sectoral reallocations. While we do find evidence of changing expenditure patterns based on a detailed analysis of more than 130 expenditure items, there is no compelling evidence for an allocative effect on consumer spending, aggregate unemployment, or consumer expectations. The absence of such an effect, despite a comparatively large effect of energy price shocks on the consumption of new domestically produced automobiles, is consistent with the small share of the U.S. auto industry in domestic real GDP and employment. It is also consistent with the symmetric behavior of real consumption in 1979 (when energy prices rose sharply) and in 1986 (when they fell equally sharply). This finding has important implications for theoretical models of the transmission of energy price shocks. Our analysis also sheds light on the declining importance of energy price shocks for the U.S. economy. We not only document the extent to which consumption aggregates have become less responsive to energy price shocks since the mid-1980s, but we trace the declining importance of energy price shocks relative to the 1970s to changes in the composition of U.S. automobile production and the declining overall importance of the U.S. automobile sector.

Fixed versus Flexible Exchange Rates: Evidence from Developing Countries

Abstract: This paper investigates the hypothesis that in a small open economy flexible exchange rates act as a 'shock absorber' and mitigate the effects of external shocks more effectively than fixed exchange rate regimes. Using a sample of 42 developing countries, the paper assesses whether the responses of real GDP, the trade balance and the real exchange rate to world output and world real interest rate shocks differ across exchange rate regimes. The paper shows that there are significant differences in the variability of macroeconomic aggregates under fixed and flexible exchange rate regimes.

Some simple tests of the globalization and inflation hypothesis

Abstract: This paper evaluates the hypothesis that globalization has increased the role of international factors and decreased the role of domestic factors in the inflation process in industrial economies. Toward that end, we estimate standard Phillips curve inflation equations for 11 industrial countries and use these estimates to test several predictions of the globalization and inflation hypothesis. Our results provide little support for that hypothesis. First, the estimated effect of foreign output gaps on domestic consumer price inflation is generally insignificant and often of the wrong sign. Second, we find no evidence that the trend decline in the sensitivity of inflation to the domestic output gap observed in many countries owes to globalization. Finally, and most surprisingly, our econometric results indicate no increase over time in the responsiveness of inflation to import prices for most countries. However, even though we find no evidence that globalization is affecting the parameters of the inflation process, globalization may be helping to stabilize real GDP and hence inflation. Over time, the volatility of real GDP growth has declined by more than the volatility of domestic demand, suggesting that net exports increasingly are acting to buffer output from fluctuations in domestic demand.

M2 Targeting, Money Demand, and Real GDP Growth in Nigeria: Do Rules Apply?

Abstract: This paper examines M2 money targeting, the stability of real M2 money demand, and the effects of deviations of actual real M2 growth rates from targets on real GDP growth and inflation rate on the Nigerian economy since the introduction of the Structural Adjustment Program (SAP) in 1986. We employ cointegration vector error correction methodology using quarterly data from 1986:1 to 2001:4. Our results indicate that a long-run relationship exists between the real broad money supply, real GDP, inflation rate, domestic interest rate, foreign interest rate, and expected exchange rate. Furthermore, both the CUSUM and CUSUMSQ tests confirm the stability of the short- and long run parameters of the real money demand function. The stability of the real money demand function supports the choice of M2 as an intermediate target as Central Bank of Nigeria (CBN) attempts to manage inflation and stimulate economic activity in Nigeria. Our empirical analysis showed that the CBN was not strongly committed to its annual M2 money growth targets, but more importantly, the deviations from M2 target growth rates impacted real GDP growth rate and inflation rate adversely during the period.

Foreign Aid, FDI and Economic Growth in East European Countries

Abstract: This paper examines the effectiveness of foreign aid and foreign direct investment in the Czech Republic, Estonia, Hungary, Latvia, Lithuania and Poland. The model includes the labor force, capital stock, foreign aid and foreign direct investment, and is estimated using pooled annual time series data from 1993 to 2002. Before carrying out the estimation, the time series properties of the data are diagnosed and an error-correction model is developed and estimated using a fixed-effects estimator. The results indicate that an increase in the stock of domestic capital and inflow of foreign direct investment are significant factors that positively affect economic growth in these countries. Foreign aid did not seem to have any significant effect on real GDP.

Exchange rate volatility and exports from East Asian countries to Japan and the USA

Abstract: The purpose of this article is to investigate the impact of exchange rate volatility on exports in four East Asian countries (Hong Kong, South Korea, Singapore, and Thailand). Specifically, this article aims at determining whether the bilateral real exchange rate volatility between an East Asian country and its trading partner negatively affects the exports of the East Asian country. Considering the dominant roles of the USA and Japan as trading partners of those East Asian countries, this article focuses on the quarterly export volumes of East Asian countries to the US and Japan for the period from 1981 to 2004. Except for the case of Hong Kong's exports to Japan, cointegration tests and estimations of error correction models indicate exchange rate volatility has negative impacts on exports either in the short-run or in the long-run, or both. On the other hand, the real GDP of importing countries and depreciation of real bilateral exchange rates turn out, in general, to have positive effects. Of special ...

National Economic Policy Simulations with Global Interdependencies A Sensitivity Analysis for Germany

Abstract: Policy simulations for national economies with econometric models, in general, are done using a standalone national model with exogenous export values and import prices. In a globalised world, such an exercise is critical, since the policy in question may change the export prices and the import volumes of the particular country and induce via international trade a change of the economic activities of the global economy and a feedback to the export values and import prices of the particular country. This paper presents a sensitivity analysis for Germany comparing the impacts of a shock on investment in a standalone simulation using the multisector model INFORGE with the results, which occur, if the same model is linked to the global multicountry/multisector model GINFORS endogenising Germany`s export values and import prices. The results are striking: the effect on real GDP is 50% higher in the global simulation than in the standalone case. Because of the specialisation in trade the differences on...