The Role of Middle Class in Economic Development: What Do Cross‐Country Data Show?

This paper investigates the channels through which the middle class may matter for consumption growth. Using several different middle‐class measures and a panel of 105 developing countries spanning the period 1985–2013, we find that a larger middle class influences consumption growth primarily through higher levels of human capital accumulation. There is also a significant direct effect of middle‐class size on consumption growth, which is more pronounced in the latter half of the sample, the 2000–2013 period.     

From Neoliberalism to Neo-developmentalism? The Political Economy of Post-crisis Argentina (2002–2015)

Argentina’s post-crisis political economy was viewed as part of the emergence of a post-neoliberal governance and the rise of New Left governments in Latin America in the past decade that marked a renewal of state activism in economy and poverty reduction. Using the concept of ‘new developmentalism’ described by Bresser-Pereira, this article offers a more nuanced approach to post-neoliberalism in Argentina. It argues that the post-neoliberal project or neo-developmentalism in Argentina does not mark a distinct departure from neoliberalism. Instead, it embodies a hybrid and complex process that maintains the core elements of economic liberalism. This article aims to contribute to the debates on post-neoliberalism and the New Left in Latin America.     

Credit risk pricing in a consumption-based equilibrium framework with incomplete accounting information

We present a consumption-based equilibrium framework for credit risk pricing based on the Epstein–Zin (EZ) preferences where the default time is modeled as the first hitting time of a default boundary and bond investors have imperfect/partial information about the firm value. The imperfect information is generated by the underlying observed state variables and a noisy observation process of the firm value. In addition, the consumption, the volatility, and the firm value process are modeled to follow affine diffusion processes. Using the EZ equilibrium solution as the pricing kernel, we provide an equivalent pricing measure to compute the prices of financial derivatives as discounted values of the future payoffs given the incomplete information. The price of a zero-coupon bond is represented in terms of the solutions of a stochastic partial differential equation (SPDE) and a deterministic PDE; the self-contained proofs are provided for both this representation and the well-posedness of the involved SPDE. Furthermore, this SPDE is numerically solved, which yields some insights into the relationship between the structure of the yield spreads and the model parameters.