Studying Growth in the Modern Classical Approach: Theoretical and Empirical Implications for the Analysis of Potential Output

Abstract

The main characteristics of the modern classical approach to growth are studied with particular reference to the notion of ‘potential output’. In contrast to mainstream approaches, which consider potential output to be exogenous and supply-determined, it is here regarded as endogenous and path-dependent. A tentative analysis is carried out of the implications of such a conception in empirical research, with special reference to the effects of the crisis on potential growth. Mainstream estimation methods (especially those used by international institutions) are shown to be deeply influenced by theory, but also to provide dubious and puzzling results. Very different empirical results and policy implications may be obtained from the standpoint of the alternative theoretical framework provided by the modern classical approach. On this basis, the paper proposes that the long-term policy target should be set in terms of the rate of unemployment rather than potential output or potential growth.     

The New Europe

British people are right in wanting a 'wait and see' approach to the euro.
It carries potential dangers of increasing federalism. With the future path of the EU so unclear, Britain should be confident in her ability to adopt a cautious approach and, if necessary, to opt-out of the euro without jeopardising either her EU membership or international standing.     

Entrepreneurial marketing and hybrid entrepreneurship: the case of JM Reid Bamboo Rods

ABSTRACT

Through the presentation of the case of James Reid, a hybrid entrepreneur that transitioned towards full-time entrepreneurship, this paper discusses a number of entrepreneurial marketing issues faced by a small business. When presented with several opportunities for business growth, Reid evaluates the extent to which growth could impact his business model, brand image and his passion. The case study demonstrates the importance of maintaining brand values and establishing a clear strategic orientation in order to create a strong brand. However, these are shown to also significantly limit the growth prospects of the business. The discussion of the case delves into these issues together with an examination of the entrepreneurial journey of a highly skilled transitory hybrid entrepreneur. This paper further introduces the concept of a comfort entrepreneur, one that willingly halts the growth of their venture, and examines the business implications thereof.     

SMEs’ Financing and Banks’ Profitability: A “Good Date” for Banks in Ghana?

Small and medium enterprises (SMEs) are the core of most economies and are a major source of economic growth. In recent times, banks have been actively involved in the financing of SMEs through the provision of loans to this sector. This paper investigates the impact of SMEs financing on banks’ profitability in Ghana. The study employed the fixed effect model as the main regression tool. The study result reveals that SMEs significantly contribute to banks’ profitability in Ghana. Interestingly, transaction cost in administering SME loans was insignificant in all the models. Higher inflation reduces the real value of the loan and erodes the interest returns on the total credit to the SMEs. Conversely, growth of GDP enhances the growth of the bank profit.     

Intergenerational Equity: Treatment of Infrastructure in New Zealand Local Government Financial Planning

This paper examines how local government authorities plan and financially provide for infrastructure while considering the needs of current and future communities. In New Zealand the Local Government Act 2002 provides a mandate for local authority planning through the requirement to publish Long Term Council Community Plans (LTCCPs). Our content analysis of the LTCCPs, annual plans and annual reports of five New Zealand local authorities reveals that these local authorities make conscious decisions about infrastructure that reflect concern for matters of intergenerational equity. They do so despite problems in relation to valuation, depreciation, deferred maintenance and financing of infrastructure assets.     

ADAM SMITH: REVOLUTIONARY FOR THE THIRD MILLENNIUM?1

Adam Smith challenged the then prevailing belief in mercantilist control. He presented a picture of an ‘… orderly yet self‐adjusting, dynamic economic system in which rising production, employment, investment and trade were linked spontaneously together by voluntary exchange …’ Present‐day governments and anti‐globalisation protesters could learn a great deal from his writings.