Showing papers on "Real gross domestic product published in 2016"

CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA

Abstract: This study aims to investigate the relationship between carbon dioxide (CO2) emissions, energy consumption, real output (GDP), the square of real output (GDP2), trade openness, urbanization, and financial development in the USA for the period 1960–2010. The bounds testing for cointegration indicates that the analyzed variables are cointegrated. In the long run, energy consumption and urbanization increase environmental degradation while financial development has no effect on it, and trade leads to environmental improvements. In addition, this study does not support the validity of the environmental Kuznets curve (EKC) hypothesis for the USA because real output leads to environmental improvements while GDP2 increases the levels of gas emissions. The results from the Granger causality test show that there is bidirectional causality between CO2 and GDP, CO2 and energy consumption, CO2 and urbanization, GDP and urbanization, and GDP and trade openness while no causality is determined between CO2 and trade openness, and gas emissions and financial development. In addition, we have enough evidence to support one-way causality running from GDP to energy consumption, from financial development to output, and from urbanization to financial development. In light of the long-run estimates and the Granger causality analysis, the US government should take into account the importance of trade openness, urbanization, and financial development in controlling for the levels of GDP and pollution. Moreover, it should be noted that the development of efficient energy policies likely contributes to lower CO2 emissions without harming real output.

Understanding the New Normal: The Role of Demographics

Abstract: We calibrate an overlapping-generations model with a rich demographic structure to observed and projected changes in U.S. population, family composition, life expectancy, and labor market activity. The model indicates that demographic factors associated with the post-war baby boom pushed up real interest rates and real gross domestic product (GDP) growth from 1960 to the 1980s. Since the 1980s, the model accounts for a little more than a 1-percentage-point decline in both real GDP growth and real interest rates—much of the permanent declines in those variables according to some estimates. Our model predicts GDP growth and interest rates will remain low by historical standards, consistent with a “new normal” for the U.S. economy.

Lower Oil Prices and the U.S. Economy: Is This Time Different?

Abstract: We explore the effect of the sharp and sustained decline after June 2014 in the global price of crude oil (and hence in the U.S. price of gasoline) on U.S. real GDP growth. Our analysis suggests that this decline produced a cumulative stimulus of about 0.9 percent of real GDP by raising private real consumption and non-oil-related business investment, and an additional stimulus of 0.04 percent, reflecting a shrinking petroleum trade deficit. This stimulative effect, however, has been largely offset by a large reduction in real investment by the oil sector. Hence, the net stimulus since June 2014 has been close to zero. We show that the U.S. economy’s response was not fundamentally different from that observed after the oil price decline of 1986. Then as now, the U.S. economy’s response is consistent with standard economic models of the transmission of oil price shocks. We find no evidence that frictions in reallocating capital and labor across sectors or increased uncertainty about the price of gasoline explain the sluggish response of U.S. real GDP growth. Nor do we find evidence of financial contagion, of spillovers from oil-related investment to non-oil-related investment, of an increase in household savings, or of households deleveraging.

Testing the relationships between energy consumption, CO2 emissions, and economic growth in 24 African countries: a panel ARDL approach

Abstract: This study complements existing literature by examining the nexus between energy consumption (EC), CO2 emissions (CE), and economic growth (GDP; gross domestic product) in 24 African countries using a panel autoregressive distributed lag (ARDL) approach. The following findings are established. First, there is a long-run relationship between EC, CE, and GDP. Second, a long-term effect from CE to GDP and EC is apparent, with reciprocal paths. Third, the error correction mechanisms are consistently stable. However, in cases of disequilibrium, only EC can be significantly adjusted to its long-run relationship. Fourth, there is a long-run causality running from GDP and CE to EC. Fifth, we find causality running from either CE or both CE and EC to GDP, and inverse causal paths are observable. Causality from EC to GDP is not strong, which supports the conservative hypothesis. Sixth, the causal direction from EC to GDP remains unobservable in the short term. By contrast, the opposite path is observable. There are also no short-run causalities from GDP, or EC, or EC, and GDP to EC. Policy implications are discussed.

The trend–cycle decomposition of output and the Phillips curve: Bayesian estimates for Italy and the Euro area

Abstract: A standard model-based trend–cycle decomposition of Italian GDP yields a likelihood function that is relatively flat. Bayesian estimation of the model allows to impose a mildly informative prior on the parameter governing the periodicity of the cycle, and thus, it helps to achieve the preferred decomposition. In a bivariate output and Phillips curve model for Italy, it is found that (i) the median response of prices to a 1 % shock to the output gap is equal to about 0.5 % after 20 quarters, (ii) the inflation cycle lags GDP on average by about three quarters. Estimating the model with Euro area data provides evidence of a smaller impact of the output gap on prices (0.4 %) and a lower lag of the inflation cycle with respect to GDP.

The Long Shadow of China's Fiscal Expansion

Abstract: In 2009 and 2010, China undertook a fiscal stimulus program worth 4 trillion yuan, roughly equivalent to 11 percent of its annual GDP. This program was largely financed by off-balance-sheet companies—known as local financing vehicles—that both borrowed and spent on behalf of local governments. These companies have continued to grow since the stimulus program concluded at the end of 2010; their spending has accounted for roughly 10 percent of GDP each year, with an increasing share used for what are essentially commercial projects. And their spending has likely been responsible for an increase of 5 percentage points in the aggregate investment rate and for part of the decline of 7 to 8 percentage points in the current account surplus since 2008. We argue that local governments have used their new access to financial resources to facilitate favored businesses’ access to capital, which potentially worsens the overall efficiency of capital allocation. The long-run effect of off-balance-sheet spending by local governments may be a permanent decline in the growth rate of aggregate productivity and GDP.

The Real Exchange Rate and Economic Growth: Revisiting the Case Using External Instruments

Abstract: We investigate the impact of movements in the real exchange rate on economic growth based on five-year average data for a panel of over 150 countries in the post Bretton Woods period. Unlike previous literature, we use external instruments to deal with possible reverse causality from growth to the real exchange rate. Our country-specific instruments are (i) global capital flows interacted with individual countries financial openness and (ii) the growth rate of official reserves. We find that a real appreciation (depreciation) reduces (raises) significantly annual real GDP growth, more than in previous estimates in the literature. However, our results confirm this effect only for developing countries and for pegs.

Presidents and the US Economy: An Econometric Exploration †

Abstract: The US economy has performed better when the president of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance. For many measures, including real GDP growth (our focus), the performance gap is large and significant. This paper asks why. The answer is not found in technical time series matters nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future. (JEL D72, E23, E32, E65, N12, N42) An extensive and well-known literature of scholarly research documents and explores the fact that macroeconomic performance is a strong predictor of US presidential election outcomes. Scores of papers find that better performance boosts the vote of the incumbent’s party. 1 In stark contrast, economists have paid scant attention to predictive power running in the opposite direction: from election outcomes to subsequent macroeconomic performance. The answer, while hardly a secret, is not nearly as widely known as it should be. 2 The US economy performs much better when a Democrat is president than when a Republican is.

Economic development and natural disasters: A satellite data analysis

Abstract: In this study we examine the impact of large-scale natural disasters on economic development. A major obstacle in exploring this relationship is the poor data quality on GDP per capita in low-income countries, while at the same time more than 90% of all disasters that happen worldwide occur in these particular countries. To overcome this problem, we use data based on satellite images of the night-time light intensity in a specific country or region which is shown to be highly correlated with income per capita. After testing for the sensitivity of the results, our main findings suggest that natural disasters reduce the amount of lights visible from outer space significantly in the short run. To be more precise, we demonstrate that climatic and hydrological disasters cause a large drop in the luminosity in developing and emerging market countries, while geophysical and meteorological disasters decrease light intensity more in industrialized countries. It turns out that using reported real GDP per capita figures underestimates the true impact. Besides, a large part of the economic consequences of the natural events is explained by their regional impact. However, in the long run most of the disaster effect has disappeared. Finally, the impact of a disaster depends partly on the size and scope of the natural catastrophe, the geographical location, the degree of financial development of a country and the quality of the political institutions present.

The relationship between real GDP, CO2 emissions, and energy use in the GCC countries: A time series approach

Abstract: This paper examines the relationship among real GDP, CO2 emissions, and energy use in the six Gulf Cooperation Council (GCC) countries. Using annual data for the years 1960–2013, stationarity, structural breaks, and cointegration tests have been conducted. The empirical evidence strongly supports the presence of unit roots. Cointegration tests reveal the existence of a clear long-run relationship only for Oman. Granger causality analysis shows that for three GCC countries (Kuwait, Oman, and Qatar) the predominance of the “growth hypothesis” emerges, since energy use drives the real GDP. Moreover, only for Saudi Arabia a clear long-run relation has not been discovered. Finally, the results of the variance decompositions and impulse response functions broadly confirm our previous empirical findings. Our results significantly reject the assumption that energy is neutral for growth. Notwithstanding, since the causality results are different for the six GCC countries, unified energy policies would not ...

The Relationship between CO2 Emission, Energy Consumption, Urbanization and Trade Openness for Selected CEECs

Abstract: This paper investigates the relationship between CO2 emission, real GDP, energy consumption, urbanization and trade openness for 10 for selected Central and Eastern European Countries (CEECs), including, Albania, Bulgaria, Croatia, Czech Republic, Macedonia, Hungary, Poland, Romania, Slovak Republic and Slovenia for the period of 1991–2011. The results show that the environmental Kuznets curve (EKC) hypothesis holds for these countries. The fully modified ordinary least squares (FMOLS) results reveal that a 1% increase in energy consumption leads to a %1.0863 increase in CO2 emissions. Results for the existence and direction of panel Vector Error Correction Model (VECM) Granger causality method show that there is bidirectional causal relationship between CO2 emissions - real GDP and energy consumption-real GDP as well.

Electricity Consumption and Economic Growth: Evidence from 17 Taiwanese Industries

Abstract: The current paper investigates the existence and nature of the Granger causality between electricity consumption and economic growth for 17 industries in Taiwan. Empirical results over the period 1998–2014 suggest that a panel cointegration test shows a long-run equilibrium relationship and a bi-directional Granger causality between electricity and economic growth has been found. The result indicates that a 1% increase in electricity consumption boosts the real GDP by 1.72%. The government can pursue energy conservation and carbon reduction policy in some industries without impeding the economic growth for adjusting the industrial structure.

The European Central Bank's QE: A New Hope

Abstract: We examine the impact of the ECB's QE on Euro Area real GDP and core CPI with a Bayesian VAR, estimated on monthly data from 2012M6 to 2016M4. We assess the total impact via a counter-factual exercise, country-by-country and through alternative transmission channels. QE announcement shocks are identified with four different identification schemes as in Weale and Wieladek (2016). We find that in absence of the first round of ECB QE, real GDP and core CPI would have been 1.3% and 0.9% lower, respectively. The effect is roughly 2/3 times smaller than in the UK/US. Impulse response analysis suggests that the policy is transmitted via the portfolio rebalancing, the signalling, credit easing and exchange rate channels. Spanish real GDP benefited the most and Italian the least.

Determinants of Growth in Fast Developing Countries: Evidence from Bundling and Unbundling Institutions

Abstract: Purpose – We assess growth determinants in the BRICS (Brazil, Russia, India, China and South Africa) and MINT (Mexico, Indonesia, Nigeria and Turkey) fast-developing nations for the period 2001-2011. Particular emphasis is laid on the bundling and unbundling of ten governance dynamics. Design/methodology/approach- Contemporary and non-contemporary Fixed- and Random-Effects regressions are employed as empirical strategies. GDP growth and real GDP output are used as dependent variables. The governance variables are bundled by means of principal component analysis. Findings- The following are some findings. First, governance is more positively significant in non-contemporary specifications as opposed to contemporary regressions. Second, there is some interesting evidence on the heterogeneity of political governance as a driver. Political governance and its constituents (political stability and voice & accountability) are significantly positive in GDP growth but insignificant in real GDP output regressions. Third, the other governance dynamics are more significant determinants of real GDP output, as opposed to GDP growth. Accordingly, they are insignificant in contemporary regressions and negatively significant in non-contemporary regressions for GDP growth. Fourth, the constituents of economic governance have the highest magnitude in the positive effects of governance dynamics on real GDP output. Practical implications- The following are some practical implications. First, lag determinants are necessary for growth targeting or timing of growth dynamics. Growth drivers for the most part are more significantly determined by past information. Second, political governance is the most important driver of economic growth, with the significance of effects more apparent in non-contemporary regressions. Third, economic governance and institutional governance are more positively predisposed to driving real GDP output than GDP growth. Originality/value- As far as we have reviewed, it is the first study to investigate growth determinants in the BRICS and MINT nations. It has strong implications for other developing countries on the contem

Risks, costs and labour markets: explaining cross-national patterns of far right party success in European Parliament elections

Abstract: What is the impact of the economy on cross national variation in far right-wing party support? This paper tests several hypotheses from existing literature on the results of the last three EP elections in all EU member states. We conceptualise the economy affects support because unemployment heightens the risks and costs that the population faces, but this is crucially mediated by labour market institutions. Findings from multiple regression analyses indicate that unemployment, real GDP growth, debt and deficits have no statistically significant effect on far right-wing party support at the national level. By contrast, labour markets influence costs and risks: where unemployment benefits and dismissal regulations are high, unemployment has no effect, but where either one of them is low, unemployment leads to higher far right-wing party support. This explains why unemployment has not led to far right-wing party support in some European countries that experienced the 2008 Eurozone crisis.

Does Ecological Footprint Impede Economic Growth? An Empirical Analysis Based on the Environmental Kuznets Curve Hypothesis*

Abstract: This paper examines the relationship between income and environmental quality using environmental Kuznets curve (EKC) hypothesis. The hypothesised link is tested using time-series analysis of 22 countries over the period 1961–2011. The degree of environmental impacts of economic activity is measured using ecological footprint (EF) per capita as explanatory variable, while real gross domestic product (GDP) per capita and its quadratic and cubic forms are used as predictor variables in these countries. First, the EKC hypothesis is tested through examining the relationship between EF and GDP using linear, quadratic and cubic functions. Further, the long-run relationship between EF and GDP is investigated using a vector error correction model. It was found that there is a cointegrated relationship between the variables in almost all countries, which was statistically significant, and EKC supported in 10 countries. Additionally, almost all error correction terms are correct in sign and are significant, which implies that some percentage of disequilibria in EF in the previous year adjusts back to the long-run equilibrium in the current year. Therefore, an efficient trade-off between environmental protection and economic benefits should be taken, and EF should be reduced through changing consumption patterns, improving the efficiency of use of resources and cleaner technology choices.

Effects of the product diversification of exports on income at different stages of economic development

Abstract: This paper empirically examines the effects of three indexes for the product diversification of exports (the Theil index, the extensive margin, and the intensive margin) on the real GDP per capita in 158 countries by considering subgroups related to income levels, i.e., in the low-, the lower middle-, the upper middle-, the non-OECD high-, and the OECD member high income countries. We implement the system-GMM estimations, and the empirical results show that the product diversification of exports is positively related to the real GDP per capita in the low-, the lower middle-, and the upper middle income countries. However, the relationship is negative in the non-OECD- and the OECD member high income countries; i.e., the product concentration of exports promotes the real GDP per capita in these countries. Further examinations also indicate that these effects mainly come from the intensive margin.

Green Economy Performance and Green Productivity Growth in China’s Cities: Measures and Policy Implication

Abstract: Resource depletion and environmental degradation have become serious challenges for China’s sustainable development. This paper constructs indicators to assess China’s green economy performance and green productivity growth, in which economic expansion, resource conservation and environmental protection need to be incorporated simultaneously. For this purpose, we combine non-radial directional distance function and meta-frontier Malmquist productivity to develop the indicators. The methodology also allows for the decomposition of driving forces of China’s green economy. Moreover, the dataset employed in this paper allows for the evaluation of 275 cities in China during the period 2003–2012. The main findings are as follows. First, most of China’s cities did not perform efficiently in terms of the green economy, with an average score of only 0.233. Second, the growth rate of green productivity is slower than real GDP, and the green productivity growth in China is only moderate. Third, innovation is the main driving force of China’s green productivity growth, but the central region lags behind when it comes to green innovation. Fourth, artificial local protectionism and transport limitations impede the progress of cities that perform ineffectively in the green economy. Based on our empirical findings, we provide policy implications and suggestions for enhancing China’s green economy performance and productivity growth.

Firm Entry and Macroeconomic Dynamics: A State-level Analysis

Abstract: Using an annual panel of US states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real GDP, productivity, and population. This is consistent with simple models of firm dynamics where a “missing generation” of firms affects productivity persistently.

The Power of a Single Number: A Political History of GDP

Abstract: GDP has been relied upon at every turn by the coalition government to demonstrate the credibility of its ‘long­term economic plan’. Ahead of the general election, LSE alumnus Philipp Lepenies will question how GDP came to be indispensable as the indicator for progress, and demonstrate why any attempt to reduce the impact of this figure on policy needs to start by understanding how it came to occupy the throne in the first place.