Adjustment policies and economic growth in developing countries — Is devaluation contractionary?

Zusammenfassung Anpassungspolitik und wirtschaftliches Wachstum in Entwicklungsl?ndern: Wirken Abwertungen kontraktiv? — Der Auffassung, da? abwertungsbedingte Substitutionseffekte ausreichend stark sind, um eine Ausweitung der Produktion zu gew?hrleisten, wird vielfach entgegengetreten. Eine verwirrende Vielzahl theoretischer Modelle verweist auf kontraktive Auswirkungen einer realen Abwertung. Empirische Analysen von Wechselkurseffekten auf das gesamtwirtschaftliche Wachstum fehlen jedoch weitgehend. Die vorliegende gepoolte L?nderquerschnittsuntersuchung für den Zeitraum 1982—1987 soll dazu beitragen, diese Lücke zu schlie?en. Die Ergebnisse der Regressionssch?tzungen widersprechen dem weitverbreiteten Pessimismus über die Wachstumseffekte realer Abwertungen. Die Sch?tzungen für verschiedene L?ndergruppen zeigen allerdings, da? die Richtung, das Ausma? und die zeitliche Abfolge der Wirkungen von den charakteristischen Strukturmerkmalen der untersuchten L?nder abh?ngen. Insbesondere die Exportstruktur erweist sich als wichtig.

---

Résumé Les politiques d’ajustement et la croissance économique dans les pays en voie de développement: Est-ce que la dévaluation empêche la croissance? — La série déconcertante des théories qui posent qu’une dévaluation empêche la croissance doute de plus en plus de l’opinion que les effets de substitution causés par une dévaluation sont suffisamment forts pour augmenter la production macroéconomique. Avec cette étude on a l’intention de diminuer le trou frappant concernant la recherche empirique sur des effets d’une dévaluation. Les résultats de cette analyse de regression faite à travers des pays pour la période de 1982 à 1987 s’opposent au pessimisme général en ce qui concerne la répercussion d’une dévaluation réelle sur la croissance économique des pays en voie de développement. Les estimations pour des groupes de pays spécifiques indiquent que la direction, le degré et la structure temporelle des effets de croissance dépendent des caractéristiques structurelles des économies, principalement des exportations prépondérantes.

---

Resumen Politicas de ajuste y crecimiento de países en desarrollo: ?puede una devaluación ser contractiva? — El impresionante número de marcos teóricos que tratan la devaluación contractiva está cuestionando seriamente la noción de que los efectos substitutivos inducidos por la devaluación son suficientemente fuertes como para garantizar un impacto netamente expansivo sobre el producto. La intención de este trabajo es llenar el vacío que existe en el studio empirico de los efectos de una devaluación. Los resultados del análisis de regresión de una muestra de varios países para el periodo 1982—1987 refutan el pesimismo generalizado sobre el impacto de una devaluación del tipo de cambio real sobre el crecimiento. Sin embargo, las estimaciones para ciertos grupos de países indican que el signo, el nivel y la estructura temporal de los impactos sobre el crecimiento dependen de las características estructurales, ante todo de las exportaciones más importantes de las economías estudiadas.

     

More similar and less equal: Economic growth in the European regions

More Similar and Less Equal: Economic Growth in the European Regions. — This paper examines the growth process of 109 European regions using a new data base. Applying various statistical tools, it concentrates on per capita income and labor productivity. The main results are the following: There has been a clear process of aggregate productivity convergence across the European regions over the 1980s. At the sectoral level, there has not been convergence in agriculture, while the industrial and services sectors show ß-convergence. Most crucially, the regional dispersion in per capita income has remained almost constant so that the differences in wealth conditions of the European citizens are still extremely high.     

Commodity price instability and economic goal attainment in developing countries

This paper reviews the theoretical and empirical micro and macro foundations for the frequent claims that instabilities in international commodity markets have deleterious effects on goal attainment in primary-commodity exporting developing countries. This review leads to the conclusion that the available evidence does not support these claims. The paper concludes with speculation on why such claims are so strong despite the lack of supporting evidence: perhaps it is because of measurement problems and perhaps because of small but articulate groups with vested interests in overstating the problem.     

Government spending and the distribution of economic growth

In the United States, total government spending, and especially government social spending, has increased greatly over the last 50 years. What effect this has had on economic growth is a subject of intense debate among politicians, policymakers, and economists. However, there has been less attention paid to the distributional effects of government spending even though economic inequality has grown greatly over the last generation and much social spending is at least indirectly intended to reduce inequality. The effects of government social spending in the United States on growth in family income at deciles of the income distribution were estimated. The results suggested that social spending but not non‐social spending was likely to increase growth in family income per capita measured over 10‐year intervals. The largest effects of social spending were for deciles below the median income. At no point in the distribution does social spending have a negative effect.     

Private capital flows,stock market and economic growth in developed and developing countries: A comparative analysis

Empirically we investigate how three types of private capital flows could promote economic growth in recipient developed and developing countries. Our focus is on the role of stock markets as a channel through which foreign capital flows could promote growth. The findings reveal that FDI exhibits a positive impact on growth, while both foreign debt and portfolio investment have a negative impact on growth in all sample countries. However, our results indicate that stock markets might be a significant channel or leading institutional factor through which capital flows affect economic growth. The findings provide clear implications that the negative impact of private capital flows can be transformed into a positive one if the stock market development has attained a certain threshold level, regardless of whether it is in developed or developing countries.     

Human capital,trade, and economic growth

Human Capital, Trade, and Economic Growth. — Human capital, because of its special role in innovative activity and technological progress, has formed the bedrock of the new theories of endogenous growth. However, it not only serves as an engine of growth but also as a productive input along with labor and physical capital. In this study, the authors find evidence of the importance of both roles of human capital. They also find that the relationship between growth and the external effects of human capital vary according to trade regime. When literacy rates are relatively high, open economies grow about 0.65 to 1.75 percentage points more than closed economies.     

Some theoretical and empirical issues relating to economic stabilization in developing countries

This paper surveys some issues relating to economic stabilization in developing countries. Section 2 examines the contributions of terms-of-trade deterioration and real exchange rate appreciation to payments imbalances in non-oil developing countries during the 1970s. Section 3 distinguishes between demand-side and supply-side policies, and discusses their respective roles in stabilization programmes. The effects of exchange-rate changes are considered within this framework. In Section 4, the effects of alternative stabilization policies on output, prices and the balance of payments are illustrated using simulations of a model that incorporates the major relationships relevant to a typical programme. Section 5 summarizes the conclusions.     

The choice of technology,economic efficiency and employment in developing countries

This paper comprises a bald presentation of some results of an enquiry into the choice of technology in the sugar and footwear indutries in Ethiopia and Ghana, and a bold examination of some implications of these results. The baldness can be justified by the need for brevity and the fact that more complete results, more fully described, will shortly be available; the boldness by the desire to focus attention on a number of issues which can stand airing in provocative form.The paper is organized in three parts. The first provides a brief theoretical introduction (to help fix ideas); the second describes the research and presents the results; and the third considers some equations raised by the findings.     

Foreign capital flows and economic growth in East Asian countries

This paper provides a quantitative assessment of the effect of various types of capital flow on the growth process of the East Asian countries, including China. The empirical analysis was based on dynamic panel data and we found; first, that domestic savings contribute positively to long-term economic growth. Second, we confirmed that FDI is growth enhancing and that its impact is felt both in the short and long run. Additionally, FDI influence on growth is much higher than domestic savings. Third, short-term capital inflow has adverse effect on the long-term as well as short-term growth prospects and it appears to be sensitive to long-term capital inflows. Fourth, long-term debt has positive effect on growth but its effect does somewhat disappear in the long-term. By and large, the observed positive contribution of FDI in the growth process of East Asian economies is a robust finding. From policy perspective, the evidence convincingly suggests that countries that are successful in attracting FDI can finance more investments and grow faster than those that deter FDI.     

Government recurrent expenditure and economic growth in less developed countries

There is not much support in less developed countries for the hypothesis that recurrent government expenditure is seen as consumption and hence more dispensable than capital expenditure. There is little evidence of a secular decline in recurrent expenditure for a group of 54 less developed countries over the period 1965–1973, nor is there strong evidence of greater instability in recurrent expenditure.     

Trade,efficiency, and growth in a cross section of countries

Trade, Efficiency and Growth in a Cross Section of Countries. —Some cross-country studies of the determinants of growth suggest only a modest role for trade policy. This study, measuring trade openness by the rate of growth of the share of exports in GDP, argues that once the possibility of outliers for trade share growth is considered, a close relationship between exports and growth emerges that works mainly through improved efficiency. This relationship proves to be robust to the inclusion of a set of commonly used right-side variables as well as the corresponding import variable.     

Unionization,market structure,and economic growth

This article investigates the macroeconomic effects of unionization in a Schumpeterian growth model with an endogenous product market structure and a unionized labor market. The endogeneity of the market structure and the trade unionism of the labor market interact and jointly determine the equilibrium unemployment, firm size, number of firms, economic growth, and distribution of income between workers and firms. We show that unionization governs the distribution of income between workers and firms and the unemployment rate, but it does not give rise to any growth effect on the economy. In addition, unionization discourages potential entrants and hence decreases the equilibrium number of firms. These results echo the empirical observation in the sense that unionization raises unemployment and alters the distribution of income between workers and firms, but it does not give rise to a significant, real impact on the firms’ investment and the economy‐wide growth.     

The economic benefits and costs of trademarks: Lessons for the developing countries

Trademarks may be credited with social benefits to the extent they identify quality for consumers. In particular, trademarks may reduce purchase errors and the costs people bear when attempting to avoid errors. However, several forms of social costs are associated with trademarks when trademarks (and the persuasive advertising promoting them) provide the sole or major source of quality identification for the product, and when grants of exclusive use to particular product sources protect the goodwill (or monopoly) rents that attach to trademarks. To maximize benefits and minimize costs, it is suggested that identification of quality and source be separated wherever possible.     

Openness and total factor productivity in Swedish manufacturing, 1980–1995

Openness and Total Factor Productivity in Swedish Manufacturing, 1980–1995. — This paper studies the effect of openness on total factor productivity (TFP) growth. Using industry-level data for Swedish manufacturing from 1980 to 1995, the paper shows that integrated industries tend to be more engaged in R&D and have more entry and exit activity than other industries. The results show that domestic R&D intensity does not contribute to the TFP growth rate. Instead, openness to international markets, which helps facilitate technology spillovers, is an important factor. There is also some evidence that producers exiting the market are less productive, implying that such exits will increase the average productivity of the industry.     

Crisis in regional economic cooperation (integration) among developing countries: A survey

The article analyses the meaning, theory and key policy instruments of economic integration among LDCs and reviews the experience of various regional cooperation efforts in the Third World.It starts from the basic premise that economic integration is not an end in itself nor are its outcomes value-free; rather its social legitimacy depends on the socio-economic and political interests which are served by regional cooperation. Power commanding local hegemonic groups as well as foreign economic and political actors (governments and the transnational enterprises) play a determining role in the orientation, content and performance of regional cooperation.The article also explores the implications for integration of certain structural economic characteristics of LDCs involving key production, technological, trade and distributional considerations. They are interpreted as calling for regional cooperation mechanisms which are non-wholistic in the sense that they are directed towards the fulfilment of specific objectives, activities and tasks which require (a) programmed yet not comprehensive harmonization policies, (b) a subordination of trade to a planned and significant expansion of economic activities in new fields, and (c) the pursuit of certain outcomes whose values are not adequately reflected by the market system and whose inducement requires more explicit government intervention.Finally the article argues that since regional cooperation is by its nature conflict-prone and subject to strong polarization forces, and since, furthermore, the above-raised considerations call for a significant role to be played by the member countries' governments, the viability of the process is subject to a continuous commitment and manifestation of political support.     

Forces of economic growth in China,India, and other Asian countries

This paper applies different approaches to modelling sources of economic growth from time series and panel data sets for 10 Asian countries over the period 1970–2010. After being subjected to fragility tests, the cross‐country estimates indicate that investment, together with policy variables and openness to trade, explains about 90 per cent of the estimated 3.2 per cent steady‐state growth rate for the region. Regional growth policy points to expanding trade, supporting financial development, and maintaining sound investment environments. Although country‐specific growth effects vary, the results imply that different estimation methods, combined with fragility tests, can help establish stronger links between growth theory and policy advice.