What is the optimal rate of R&D investment to maximize productivity growth?

Governments in modern economies devote much policy attention to enhancing productivity and continue to emphasize its drivers such as investment in R&D. This paper analyzes the relationship between productivity growth and levels of R&D investments. The econometric analysis shows that more than 65 per cent of productivity growth variance is due to its dependence on gross domestic expenditure on R&D expressed as percentage of GDP (GERD). Economic analysis shows that productivity growth = f(GERD) is a concave function downwards due to diminishing returns to research investments. In addition, the research shows that the range of GERD between 2.3 per cent and 2.6 per cent maximizes the long-run impact on productivity growth and it is the key to sustained productivity and technology improvements that are becoming more and more necessary to modern economic growth.     

Did globalization drive convergence? Identifying cross-country growth regimes in the long run

This paper is the first to apply a finite mixture model to a sample of 64 nations to endogenously analyze the cross-country growth behavior over the period 1870–2003. Results show that growth patterns were segmented in two worldwide regimes, the one characterized by convergence in per capita income, and the other by divergence. Interestingly, when three historical epochs are distinctly analyzed, in order to investigate the empirical link between globalization and convergence, the dynamics which dominated over the whole period seem to have emerged only during the post-1950 years. In contrast, the First Global Wave was marked by persistent heterogeneities.     

The real exchange rate in Brazil Mean reversion or random walk in the long run?

This paper studies the behavior of the real exchange rate in Brazil over the longest possible period for which data are available: 1855–1990. Does the real exchange rate follow a random walk or does it revert to its mean, possibly nonstationary, level? The evidence is mixed. Formal tests can not reject the hypothesis of nonstationary behavior, although the judgement is borderline. However, time-series identification favors a stationary interpretation, and simple autoregressive processes for the real exchange rate yield extremely robust and satisfactory estimates.     

Foreign exchange market interventions and the $–¥ exchange rate in the long run

This article examines whether foreign exchange market interventions conducted by the Bank of Japan are important for the dollar–yen exchange rate in the long run. We rely on a re-examination of the empirical performance of a monetary exchange rate model. This is basically not a new topic; however, we focus on two new questions. First, does the consideration of periods of massive interventions in the foreign exchange market uncover a potential long-run relationship between the exchange rate and its fundamentals? Second, do Forex interventions support the adjustment towards a long-run equilibrium value? Our results suggest that taking periods of interventions into account within a monetary model does improve the goodness of fit of an identified long-run relationship to a significant degree. Furthermore, Forex interventions increase the speed of adjustment towards long-run equilibrium in some periods, particularly in periods of coordinated forex interventions. Our results indicate that only coordinated interventions seem to stabilize the dollar–yen exchange rate in a long-run perspective.     

What is the future of water quality trading?

A comprehensive review of experiences with water quality trading (WQT) programs worldwide is presented, spanning altogether more than 4 decades. A new WQT database is built, extracting data and information from existing review papers, complemented with gray and published literature about individual trading programs. Key aspects that affect trading volumes and program continuation are identified and categorized. No single success or fail factor emerges from this review, typically a mix of factors play a role. There is potential for WQT to evolve further and serve as a cost-effective pollution control instrument, but this requires nudging political will to regulate nonpoint source.     

What is the real size of China's economy?

On 20 December 2005, China's National Bureau of Statistics adjusted China's nominal GDP by CNY 2.3 trillion. The bulk of this upward adjustment was attributed to improved coverage of value added by services. The service industry now makes up 40% of GDP. Based on previous studies and other observations, this paper point outs that there is still significant underreporting of the service industry and, hence, China's GDP is likely to be underestimated. We find a plausible share of service industry in GDP to be in the range of at least 45% to 55%.     

What is the role of innovation in productivity growth in Central and Eastern European countries?

The paper uses company level data from the Eurostat's Community Innovation Survey 2008 and applies CDM model in order to estimate the links between R&D engagement, R&D intensity, innovation output and productivity in selected Central and Eastern European Countries – Bulgaria and Romania, and compares their performance with Germany. The results showed that different processes drive company's decision to engage in R&D in Bulgaria and Romania in comparison to Germany; R&D intensity is an important factor of product innovation in the observed CEE countries and product innovation leads to higher productivity in Bulgaria and Romania, while process innovation leads to higher productivity in Bulgaria, but not in Romania.     

What remains of the growth controversy ∗

Nobel laureate R.M. Solow (1992) reflected that, ‘The Kaldor–Kalecki–Robinson–pasinetti line made life harder for itself by being part of a wholesale attack on mainstream economics. Anyway, it was not ever able to muster a body of serious applied work’. This article considers the accuracy of an assessment like Solow's of the sucess of the growth theorys that economists have proposed as alternatives to neoclassical growth theory. The article, which takes an historical perspective, focuses on Kaldor's growth theory.     

Does the presence of high-skilled employees increase total and high-skilled employment in the long run? Evidence from Austria

Studies conducted for the US have found a positive effect of human capital endowments on employment growth, with human capital endowments diverging at the same time. In contrast, studies for European countries have found convergence of human capital endowments. This paper tests these relationships for the 99 Austrian districts for the observation period 1971–2011 by estimating how the presence of high-skilled employment affects total, low-skilled and high-skilled employment growth. To this end, OLS, fixed-effects and first-difference regressions are estimated. The results indicate continuous convergence of high-skilled employment which, however, slowed down significantly since the 1990s. In contrast to previous studies, evidence for positive effects of high-skilled on total and low-skilled employment is only weak and varies over time. Furthermore, the results show that total and high-skilled employment in suburban areas grew faster than in other regions, while districts which bordered the Eastern Bloc were disadvantaged. Nevertheless, spatial neighbourhood effects within Austria are only weak.     

What can Remove the Obstacles from the Process of Asian Unification

Presently, the regional economic cooperation in Asia is developing fast and well with the ASEAN as an axis and with the proactive participation of major Asian nations such as China, 3apan, Korea and India. While envisaging the bright prospect, the unification process, however, is destined to encounter some obstacles and difficulties. By analyzing the hindrance, as well the reasons why Asia lags far behind Europe in unification, the author believes that Asian nations should draw on the lessons and experiences of European countries and learn their principle of subsidiary （bottom-up approaches）, which may serve as the key solution for Asia to overcome the impending obstructions.     

What are the distributional implications of halving poverty in South Africa when growth alone is not enough?

The country risk indicator, as measured by the JP Morgan's EMBI or grades of rating agencies such as Standard & Poor's (S&P's) or Moody's, does not seem to truly reflect the fundamentals of an economy. Countries that pursue sound economic policies are frequently placed on the same level as countries with a populist orientation or with a recent history of default or debt restructuring. Such circumstance generates a feeling of unease with regard to these ratings. The objective of this article is to investigate whether these indicators truly reflect market fundamentals or whether some sort of prejudice, or intolerance towards certain countries, can be identified. We use the Oaxaca–Blinder decomposition to analyse the differences in country risk, measured as by EMBI+, for a group of emerging markets. This decomposition allows us to separate the ‘justified’ (differences in fundamentals) from the ‘unjustified’ differences (same fundamental differently evaluated).     

Non‐linear effect of exchange rate volatility on exports: the role of financial sector development in emerging East Asian economies

This paper empirically examines the role of financial sector development in influencing the impact of exchange rate volatility on the exports of five emerging East Asian countries – China, Indonesia, Malaysia, the Philippines and Thailand – using a GMM‐IV estimation method. The results indicate that the effect of exchange rate volatility on exports is conditional on the level of financial sector development. The less financially developed an economy, the more its exports are adversely affected by exchange rate volatility. In addition, a stable exchange rate seems to be a necessary condition to achieve export promotion via a currency depreciation in these economies.     

How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?

China's global current account surplus equaled 9% of Chinese GDP in 2006 and 11% of GDP in 2007. Many argue that a renminbi appreciation would help to rebalance China's trade. Using a panel dataset including China's exports to 33 countries we find that a 10% renminbi (RMB) appreciation would reduce ordinary exports by 12% and processed exports by less than 4%. A 10% appreciation of all other East Asian currencies would reduce processed exports by 6%. A 10% appreciation throughout the region would reduce processed exports by 10%. Since ordinary exports tend to be simple, labor-intensive goods while processed exports are sophisticated, capital-intensive goods, a generalized appreciation in East Asia would generate more expenditure-switching towards US and European goods and contribute more to resolving global imbalances than an appreciation of the RMB or of other Asian currencies alone.     

What drives the global official/policy interest rate?

We construct a GFAVAR model with newly released global data from the Federal Reserve Bank of Dallas to investigate the drivers of global official/policy interest rate. We find that 66% of movement in global official/policy interest rates is attributed to changes in global monetary aggregates (23%), oil prices (19%), global output (16%) and global prices (8%). Global official/policy interest rates respond significantly to increases in global output, inflation and oil prices. Increases in global policy interest rates are associated with reductions in global prices and global output. The response in official/policy interest rate for the emerging countries is more to global inflation, for the advanced countries (excluding the U.S.) is more to global output, and for the U.S. is to both global output and inflation.     

What makes growth sustained?

We identify structural breaks in economic growth in 140 countries and use these to define “growth spells:” periods of high growth preceded by an upbreak and ending either with a downbreak or with the end of the sample. Growth spells tend to be shorter in African and Latin American countries than elsewhere. We find evidence that growth duration is positively related to: the degree of equality of the income distribution; democratic institutions; export orientation (with higher propensities to export manufactures, greater openness to FDI, and avoidance of exchange rate overvaluation favorable for duration); and macroeconomic stability.     

Has the capital accumulation in the Asian miracle economies been fuelled by growth?

The Asian growth miracle is often attributed to factor accumulation under the implicit assumption that savings, broadly defined, have been high and increasing due to exogenous forces. Using data for India, Indonesia, Korea, Singapore and Taiwan over the period 1870–2011 this article examines the causal relationship between growth and saving. The response of growth to savings is first estimated using instruments to generate exogenous variation in savings rates. The residual variation in growth that is not driven by savings is then used as an instrument to estimate the effect of growth on savings. The estimates show that the spectacular saving rates in the Asian miracle economies have been fuelled by growth, and not the other way around.     

Exchange rate pass-through in the Asian countries: does inflation volatility matter?

This paper presents a nonlinear relationship between exchange rate pass-through (ERPT) and inflation volatility. Through the lens of a threshold framework, we uncover a clear evidence of near to one ERPT to consumer prices once inflation volatility crosses a threshold level of 4.17. Clearly, there are significant differences in the degree of ERPT between the high and low inflation volatility in the inflation targeting (IT) and non-IT Asian countries.     

Do exchange rate changes have symmetric or asymmetric effects on the trade balances of Asian countries?

Recently the linear ARDL approach was modified and a non-linear version of the same approach that is used mostly to assess asymmetric effects of some exogenous variables on the dependent variable was introduced. The non-linear model was recently used by one study to show that indeed exchange rate changes have asymmetric effects on the trade balance of a few advanced countries. The same was demonstrated for transition economies by another study. In this article, we provide additional asymmetric effects from seven Asian economies by showing that in most cases we find evidence of short-run and long-run asymmetric effects of exchange rate changes on the trade balance. Like other studies, our findings are country specific.     

Does a multi-sectoral design improve indicator-based forecasts of the GDP growth rate? Evidence from Switzerland

This article presents a multi-sectoral composite indicator for the Swiss GDP growth rate, targeting a lead of two quarters. The in-sample period ranges from 1991 to 2002 and 14 data points are reserved as out of sample to assess the forecasting performance. The results appear promising, in terms of both phase and amplitude. Comparisons with two other uni-sectoral composite leading indicators for the same reference series–the traditional KOF (Konjunkturforschungsstelle) barometer as published until March 2006 and a uni-sectoral composite indicator computed from the same indicators as the multi-sectoral instrument–show that the new approach is superior to the alternatives, which is due to both its broader information basis as well as to the structure that is imposed by the multi-sectoral design. Yet, there are pronounced differences regarding the accuracy of the sectoral forecasts, so that there is scope for improvement.