optimal monetary policy in an economy with inflation persistence abstract this paper studies optimal monetary policy in a model where inflation is persistent two types of price setters are assumed to exist one acts rationally given calvo type constraints on price setting the other type sets prices according to a rule of thumb this results in a phillips curve with both a forward looking term and a backward looking term the phillips curve nests a standard purely forward looking phillips curve as well as a standard purely backward looking phillips curve as special cases a cost push supply shock is derived from microfoundations by adding a time varying income tax and by making the elasticity of substitution between goods stochastic a central bank loss function for this model is derived from a second order taylor approximation of the household s welfare function optimal monetary policy for different relative values of the forward and backward looking terms is then analyzed for both the commitment case and the case of discretion

balance of payments the harrod foreign trade multiplier and economic growth the european and north american experience 1970 85 1988 balance of payments the harrod foreign trade multiplier and economic growth the european and north american experience 1970 85 applied economics vol 20 no 12 pp 1635 1642

technology structural change and bop constrained growth a structuralist toolbox the latin american structuralism las is a significant part of the heterodox tradition in the theory of long run growth with a focus on the problems of developing economies which started their industrialization process when other regions had already accumulated substantial technological capabilities the emergence of a centre periphery system posed specific problems to growth and distribution in laggard economies which las discusses in a systematic way in this paper we presented a simple model which firstly captures key insights of the las school such as the persistency of technological asymmetries and structural heterogeneity secondly it can be used to analyze the impacts of shocks and policies based on how they affect supply side and demand side parameters of the model thirdly it links more closely post keynesian macroeconomics based on the bop constraint with the evolutionary microeconomics concerned with the dynamics of learning lastly it can be used as a toolbox and a teachable model in the analysis of the interactions between structural change technological catching up and long run growth

optimal price level drift under commitment in the canonical new keynesian model in both the canonical and many extended versions of the new keynesian model optimal monetary policy under commitment implies price level stationarity as long as expectations are rational we show that this is no longer the case if the central bank and private agents make decisions before observing current shocks the optimal amount of price level drift in response to unexpected innovations to inflation is quantitatively important this result has important implications for monetary policy including the design of the optimal loss function for the central bank if it cannot commit to its future policies a la fois dans la version canonique du nouveau modele keynesien et de ses versions etendues la politique monetaire optimale quand il y a engagement implique qu il y aura stationnarite du niveau des prix aussi longtemps que les anticipations sont rationnelles on montre que ce n est plus le cas si la banque centrale et les agents prives prennent des decisions avant d observer les chocs courants le montant optimal de la derive du niveau des prix en reponse aux innovations non anticipees dans l inflation est quantitativement important ce resultat a des implications importantes pour la politique monetaire y compris le design d une fonction de perte optimale pour la banque centrale si elle ne peut pas s engager a poursuivre ses politiques dans l avenir

market performance in an open developing economy technical and allocative efficiencies of korean industries this paper first examines determinants of technical efficiency in terms of competition and government regulation including protection in korean industries relying heavily upon the concepts of x efficiency and rentseeking activities allocative efficiency measured as profitability is then considered with technical efficiency as a determinant the outcome of the regression shows that both the sheltering of industries from international competition and the financial market distortions strongly affect technical efficiency and that technical efficiency as well as effective protection rate are important determinants of profitability

global growth and international cooperation a structuralist perspective this paper revisits the structuralist ideas on trade and growth and suggests based on the prebisch s principle of implicit reciprocity that policies for promoting structural change in the periphery may lead to higher global growth and a better income distribution across countries the paper discusses the inter relations and complementarities that exist between autonomous expenditure and industrial and technology policies in the long run with this objective we develop a structuralist growth model in which the technology gap and the growth rate of the domestic autonomous expenditure are endogenously determined in a two country centre and periphery international economy copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the harrod foreign trade multiplier and economic growth in asian countries the validity of the harrod foreign trade multiplier for 11 asian countries is tested the results obtained generally support thrilwall s specification of the multiplier this suggests in an open economy relevant economic management is the factor that manipulates the income elasticities of exports and imports

productivity growth protection and plant entry in a deregulating economy the case of india in this paper we study the comparative performance of indian manufacturing industries during relatively recent periods of domestic regulation and de regulation of plant entry the period of de regulation is accompanied by largely unchanging levels of import competition and higher output growth the growth of labour and total factor productivity tfpg is observed to be higher during the deregulation period we use data on 42 three digit manufacturing industries our sample covers consumer intermediate and capital good industries we study the relationship between levels of effective protection and total factor productivity growth tfpg we found that increasing effective rates of protection was not associated with lower tfpg we test the hypothesis that higher degree of trade protection induces greater entry of plants this hypothesis is statistically supported our econometric estimates found a positive association between net entry and tfpg after controlling for inter industry differences in effective protection asset size of plants and demand growth our results support the proposition that competition positively contributes to tfpg during deregulation

a welfare analysis of canadian chartered bank mergers an econometric model of canada s five largest banks is estimated using time series data from 1976 to 1996 the principal findings are that chartered bank technology is characterized by increasing returns to scale scale efficiency is sufficiently large to offset the consequences of reduced competition that might have arisen from a merger between bank of montreal and royal bank of canada canadian imperial bank of commerce and toronto dominion bank or both the estimated model predicts that all the mergers proposed in 1998 would have led to slightly lower prices and consequently to an increase in consumer welfare une analyse de bien etre des fusions des banques a charte canadiennes l auteur calibre un modele econometrique des cinq plus grandes banques a charte au canada a l aide de series chronologiques de 1976 a 1996 les principaux resultats montrent que la technologie des banques a charte a des rendements croissants a l echelle ces rendements a l echelle sont suffisamment importants pour compenser les effets de reduction de la concurrence qui auraient pu se produire en consequence de la fusion de la banque de montreal et la banque royale de la banque imperiale de commerce et de la banque toronto dominion ou des deux le modele suggere que toutes les fusions proposees en 1998 auraient entraine des prix legerement plus bas et en consequence un accroissement dans le niveau de bien etre des consommateurs

indexed versus nominal government debt under inflation and price level targeting this paper presents a dsge model in which long run inflation risk matters for social welfare optimal indexation of long term government debt is studied under two monetary policy regimes inflation targeting it and price level targeting pt under it full indexation is optimal because long run inflation risk is substantial due to base level drift making indexed bonds a better store of value than nominal bonds under pt where long run inflation risk is largely eliminated optimal indexation is substantially lower because nominal bonds become a relatively better store of value these results are robust to the pt target horizon imperfect credibility of pt and model calibration but the assumption that indexation is lagged is crucial a key finding from a policy perspective is that indexation has implications for welfare comparisons of it and pt

structural change and the bop constraint why did latin america fail to converge this paper discusses why latin america failed to achieve sustainable convergence with the developed world since 1960 and analyses different phases of convergence and divergence using a structuralist keynesian approach first it is argued that there are critical differences between latin america the developed economies and the asian economies as regards the evolution of the income elasticity of the demand for imports the rate of growth of exports and the balance of payments constrained rate of growth the income elasticity of the demand for imports in latin america showed an upward trend particularly after the mid 1970s which was not matched by a similar increase in exports a pattern in sharp contrast with that of the east asian countries the evolution of and exports are used to set forth a typology of latin american economic growth since 1960 in addition the paper relates elasticities and the less favourable latin american performance to the intensity and direction of structural change using a broad sample of developed and developing economies it is shown that the developing countries that succeed in reducing the income gap are those that transformed their economic structures in favour of sectors with higher schumpeterian and keynesian efficiency copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

explaining growth rate differences in highly indebted countries an extension to thirlwall and hussain in recent years growth rate differences have increased and have elicited numerous explanations among the most controversial interpretations is that postulated by thirlwall 1979 and later extended by thirlwall and hussain 1982 both papers arguing that growth rate differences are best explained by demand constraints found in the balance of payments although the inclusion of capital flows by thirlwall and hussain 1982 is widely viewed as an improvement in the original model still we believe the model to be less than complete because it omitted the effect of debt servicing extending the model to include the effect of debt servicing this paper improves the predictability of the original model as it brought the actual growth rates closer to the predicted growth rates for most of the countries used in the previous research

viewpoint canadian competition policy progress and prospects this paper discusses the state of competition policy in particular the economics of competition policy in canada today and considers its prospects going forward it argues that i the importance of competition policy has become accepted widely in canada and indeed throughout much of the world ii competition policy design and enforcement is in general well done in canada iii economists including many canadians have played a central role in the development of an efficient and effective competition policy in canada and elsewhere and iv competition policy in canada is today facing very serious challenges and economists should be concerned la politique de concurrence au canada progres et prospective ce memoire discute de l etat de la politique de concurrence en particulier l economie de la politique de concurrence au canada aujourd hui et examine ce qui l attend on suggere que i l importance de la politique de concurrence est devenue largement acceptee au canada et dans le gros du reste du monde ii le dessein et l application de la politique de concurrence sont en general bien faits au canada iii les economistes et plusieurs canadiens parmi eux ont joue un role central dans le developpement d une politique de concurrence efficace et effective au canada et ailleurs et iv la politique de concurrence au canada fait face a des defis tres serieux ces temps ci et les economistes devraient s en inquieter

correctly analysing the balance of payments constraint on growth the balance of payments constrained growth bpcg model provides an interesting hypothesis regarding economic growth the main implication is that world demand places the dominant constraint to which individual country growth adjusts i discuss this implication and argue that tests of the bpcg model have essentially been tests of the hypothesis that trade is balanced over the long run a plausible hypothesis but one that need not hold mainly through responses to world demand as transmitted via income elasticities i then discuss the role of relative prices and investment point out logical inadequacies in the traditional bpcg framework and suggest an alternative theoretical framework to investigate its robustness our theoretical and empirical explorations suggest that traditional tests of the bpcg model may be misleading including investment as a proxy for the capacity to export and addressing endogeneity issues for example noticeably weakens the influence of world demand the evidence presented contributes to reconciling evidence supporting the bpcg hypothesis with recent work that consistently finds an important role for the level of the real exchange rate and investment independently of world demand

a developing country view of the current global crisis what should not be forgotten and what should be done macroeconomic theory will surely be affected by the current global crisis there are signs that some old theories and insights will have a comeback this paper argues that among them economists should not forget the lessons that have been learnt from three decades of several financial crises in developing countries we emphasise two important lessons first preventing crises in developing countries requires not only the regulation of domestic financial systems but also a consistent set of macroeconomic policies in particular we stress the need for consistency between the exchange rate rule the capital account regime and the domestic financial market regulations second financial crises in developing countries tend to worsen both the balance of payments and the fiscal balance traditional adjustment policies tend to exacerbate the recessive trends in output and employment this is just the opposite of what is required and what governments in developed countries are able to do developing countries should push for an agenda that helps them deal with these problems

long run price elasticities and the marshall lerner condition revisited abstract in estimating trade elasticities most previous researchers employed nonstationary data and ols or 2sls method with new developments in the literature this paper uses stationary data and johansen s cointegration analysis to provide new trade elasticities for almost 30 countries

financial signalling and the deep pocket argument this article provides a formal representation of telser s 1966 deep pocket argument by considering a model in which the entrant s and the incumbent s financial structures are endogenous the entrant s financial vulnerability may be explained by informational asymmetries in financial markets financiers are uncertain of the entrant s true value but they know the incumbent s true worth both firms have to finance a fixed expenditure before starting production in equilibrium the incumbent finances with equity while the high value entrant comes into the market heavily leveraged compared with the incumbent this provides an incentive for the incumbent to engage in predatory practices such as a price war to exhaust the entrant financially and cause his bankruptcy

an empirical test of the infant industry argument the basic infant industry argument maintains that the cost of a new activity is initially high it does not pay any individual to enter an infant industry at free trade prices if developed the industry will permit a reasonable return on initial losses and a temporary period of protection is required this paper has attempted two things to develop an empirical test for the validity of the infant industry argument and to use that test on turkish data the test is simple and straightforward input per unit of output must fall more rapidly in more protected industries if there is to be any rationale for infant industry protection in the turkish case there was no such tendency over the period covered the fact that protected turkish industries did not experience rapid increases in output per unit of input is sufficient to prove that protection was not warranted it does not however prove that there were no infant industries the trade regime might have provided the wrong incentives and under an alternative structure output per unit of input might have grown more rapidly in some or possibly all turkish industries in conclusion protection did not elicit the sort of growth in output per unit on which infant industry proponents base their claim for protection

spurious welfare reversals in international business cycle models several papers have documented spurious welfare reversals incompletemarkets economy produces a higher level of welfare than the completemarkets economy this paper first demonstrates how conventional linearization can generate approximation errors that can result in welfare reversals using a two country production economy we argue that spurious welfare reversals are not only possible but also plausible under reasonable values for model parameters this paper then proposes an approximation method that modifies the conventional linearization by a bias correction this method can be easily implemented and approximates welfare as accurately as a second order perturbation method

real exchange rate technological catching up and spillovers in a balance of payments constrained growth model abstract the main objective of this work is to investigate the theoretical interrelationships between economic growth the national innovation system nis and the real exchange rate rer in an export led growth model formally this work presents new changes in the kaldor dixon thirlwal s model by the introduction of the rer the nis and a function that captures the endogeneity of productivity in the industrial sector in the short term the equilibrium growth rate depends on the real exchange rate level and of the nis development which responds to the size of the technological gap the public and private investments in r d in relation to the output growth rate ratio and the absorption capacity for technological spillovers in the long run assuming the constancy of all exogenous variables the convergence of the growth process depends on the output growth elasticity in relation to exports the price elasticity of exports and the elasticity of productivity growth relative to output growth of the economy in general and to industry in particular

price level targeting and stabilisation policy a survey this paper surveys recent articles on the costs and benefits of price level targeting focusing its use as a tool for stabilisation policy it discusses how price level targeting can affect the short run trade off between output and inflation variability by influencing inflation expectations it reviews how assigning an explicit price level target to a central bank that is unable to commit to its future policies can improve economic performance it surveys other potential benefits and costs among the costs it underlines the importance of perfectly rational expectations for the optimality of price level targeting and an exacerbation of the time inconsistency problem

structural change the real exchange rate and the balance of payments in mexico 1960 2012 this paper estimates a structural model of the balance of payments with disaggregated exports manufactures and other and imports final and intermediate and a reduced form model of the trade balance for the mexican economy the analysis identifies structural changes in the composition of mexico s trade and the parameters that affect it across five subperiods marked by statistical breakpoints the results indicate that a tightening of the balance of payments constraint may account for the post liberalization slowdown in mexico s growth only during certain subperiods and that the impact of real exchange rate changes on the trade balance has diminished most likely as a result of the increasing integration of export industries into global supply chains the results also suggest an asymmetry whereby a country cannot sustain growth above the rate consistent with balance of payments equilibrium as expected but it can grow persistently below that rate when other constraints are more binding

the macro impacts of korea s heavy industry drive re evaluated the korean heavy industry hci drive has been criticised for the misallocation of capital and for negative spillover effects on growth inflation the current account and debt however such criticism places too much blame on hci for the late 1970s economic deterioration and gives hci insufficient credit for the subsequent economic rebound korean hci was a catch up exercise which attracted cheap foreign capital to accelerate structural change nevertheless the mid 1970s decision to pursue hci as a big push was flawed since it did result in project bunching that strained implementation capacity despite the safeguards which korea built into its hci strategy

the competitive effects of vertical agreements comment recent economic analyses of vertical restraints and integration emphasize the circumstances under which these arrangements are socially efficient efficiency claims have proven contentious however for exclusive dealing a vertical restraint that prohibits any outlet carrying a manufacturer s product from stocking substitute brands this paper analyzes the impact of exclusive dealing on competition and allocative efficiency opinions expressed on the impact of exclusive dealing range from the extreme view that it is invariably anticompetitive to the view that it is always procompetitive the u s supreme court has concluded that in hundreds if not thousands of communities where there is a single retailer for a product

balance of payments constrained growth a rejoinder to professor thirlwall professor thirlwall has argued that the growth rate of a country is constrained by the requirement that the external current account must broadly balance he maintains that a country s growth can be analysed using a dynamic harrod trade multiplier and that a country s long run growth rate y will approximate to the ratio of the rate of growth of exports x to the income elasticity of demand for imports a in a recent article in this journal mcgregor and swales 1985 doubts were expressed about the theoretical and empirical grounds on which thirlwall makes these claims in his reply thirlwall argues that such doubts are unfounded he clarifies his theory on a number of points he argues that his theory was subjected to inappropriate empirical tests and whilst accepting that equation 1 can be derived from a strict neoclassical model he invites the reader to choose between the plausibility of the neoclassical story as against the keynesian alternative

heterodox theories of economic growth and income distribution a partial survey heterodox theories of economic growth and income distribution are surveyed focusing on major theories and recent contributions first a general framework for examining growth and distribution is discussed in terms of which classical marxian and post keynesian kaleckian and other theories are presented since this framework examines how variables are determined in equilibrium second dynamics behind equilibria are examined focusing on goods market and labor market changes third the framework is extended in a variety of ways to examine additional models addressing productivity growth and technical change money and inflation finance and debt additional distributional considerations multisector issues open economy questions and the environment it is concluded that the literature on heterodox theories of growth and distribution is vibrant large and growing and addresses many issues that are ignored or neglected in orthodox theories including power unemployment and aggregate demand

clusters entrepreneurial ecosystem co creation and appropriability a conceptual framework extant literature on clusters underplays the role of entrepreneurs and entrepreneurial management in creating and co creating organizations markets and supporting ecosystems we employ transaction costs resource knowledge capabilities and power control based theories to provide a comparative static governance based perspective on clusters we embed this into a more general co evolutionary entrepreneurial theory of the emergence evolution and co evolution of markets ecosystems and clusters we suggest that clusters can involve advantages that help engender superior appropriation of co created value as compared to alternatives entrepreneurial managers faced with a degree of choice will help co create clusters and be part of them for as long as they can appropriate more value in this way than through alternatives

inflation nominal portfolios and wealth redistribution in canada les ameliorations dont pourraient beneficier les regimes de politique monetaire font actuellement l objet d un debat public dans les pays caracterises par un taux d inflation bas et stable comme les etats unis et le canada ainsi le regime canadien de cibles d inflation est soumis en ce moment a un examen en profondeur

vertical control and price versus nonprice competition this paper considers a manufacturer distributing a product through retailers who compete in price and service which reduces the time it takes to purchase a good the mix of these instruments that maximizes collective profit is determined by the tastes of consumers on the product margin whereas decentralized retailers consider as well the tastes of consumers on the interretailer margins given search or travel costs consumers with low time costs are overrepresented on the interretailer margins in considering customers on the wrong margin retailers are therefore biased toward price competition this distortion that can be corrected with vertical restraints

dynamic analysis on market structure of china s coal industry abstract according to industrial organization theory market structure is a crucial factor to market performance based on the var model and the data from 1994 to 2014 we revealed the dynamic response route of the market structure to these factors and the change process of contribution rate of these factors to the market structure it shows that market structure is inertial adjustment technology advance and industry policy have continuous effects on improvement of market concentration ratio market size and production scale have sustained negative effects on market concentration ratio fixed capital has barrier effect which is mainly the entry barrier effect at the beginning and then the exit barrier effect continues to play a leading role therefore the government has no need to introduce special policies to encourage merger or expansion on the capacity as enterprises would do it spontaneously it is necessary to make market access system stricter to improve exit compensation mechanism and to promote technological innovation all these policies need dynamic adjustment based on the stages of economic cycle

investigating inflation persistence across monetary regimes under inflation targeting estimates of the indexation parameter in hybrid new keynesian phillips curves are either equal to zero or very low in the united kingdom canada sweden and new zealand analogous results hold for the euro area under the european monetary union and for switzerland under the new monetary regime under stable regimes with clearly defined nominal anchors inflation appears to be purely forward looking these results question the notion that the intrinsic inflation persistence found in post wwii u s data is structural in the sense of lucas carnegie rochester conference series on public policy 1 1976 19 46 and suggest that hardwiring inflation persistence in macroeconomic models is potentially misleading

price level versus inflation targeting abstract this paper shows that price level targeting outperforms inflation targeting in the standard new keynesian model under the assumption that the central bank is forced to operate in an environment characterized by discretion in the benchmark case with no persistence in the shocks the commitment solution can be fully replicated intuitively price level targeting introduces history dependence and a stationary level of prices both of which are prominent features of the commitment solution

money output and the nominal national debt this paper presents a model of finitely lived rational agents in which unanticipated innovations in the stock of fiat money affect real variables an unanticipated inflation reduces the real value of the nominally denominated national debt thereby reducing the crowding out of capital and or the tax burden both effects stimulate increased investment in capital which leads to an increase in real output and wages in the following periods in contrast with price surprise models these real effects occur even if the monetary innovation is instantly and perfectly observed by agents copyright 1990 by american economic association

aggregate and welfare effects of redistribution of wealth under inflation and price level targeting abstract an unanticipated rise in the price level redistributes wealth from lenders to borrowers its size depends on the monetary policy regime as inflation targeting it and price level targeting pt have different implications for the price level path following price level movements the effects of an unexpected 1 price level increase are measured and assessed under both regimes overall the redistribution of wealth and the implied aggregate and welfare effects are larger under it than they are under pt the youngest the poorest and the government gain at the expense of the rest of the population and when the government gain is given to households as lump sum transfers the effects on gdp are negative and long lasting

productivity bias hypothesis and the purchasing power parity a review article abstract productivity differentials among countries are said to be one of the major sources that contribute to the deviation of the purchasing power parity based exchange rate from the equilibrium rate hence the productivity bias hypothesis prior to last review article on the productivity bias hypothesis in 1976 almost all studies relied upon cross sectional regression analysis since then two groups of empirical studies have emerged while one group has employed time series data the other one has used panel data these two later groups have provided more support to the hypothesis than the earlier cross sectional studies this paper reviews and criticizes each group separately and provides tables that summarize main features of each study

how low is a guaranteed lowest price a game based on the bertrand duopoly model is constructed to study the effects of price guarantee policies before it chooses a list price a firm can make a binding commitment to match or beat its competitor s price the effectiveness of these price guarantee policies in facilitating price collusion depends on the solution concept used furthermore there exists an equilibrium in which neither firm offers any price guarantees and each firm sets price equal to marginal cost

the maturation and growth of infant industries the case of korea abstract this paper first shows that contrary to evidence from most developing countries korean infant industries under protection have tended to mature it also shows that output grows faster in infant industries than in mature ones the paper then discusses probable factors that have made the maturation and growth of infant industries possible in korea overall the empirical evidence and its interpretation support the revisionist rather than neoclassical or market friendly view in the recent debate on east asian industrialization

productivity change and dynamic comparative advantage this paper proposes a simple decomposition of the widely used drc measure of international competitiveness into three distinct elements 1 changes in international prices 2 changes in production techniques and 3 total factor productivity change the decomposition provides a clear analytical link between two largely separate methodologies for assessing economic performance cost benefit indicators based on the world price rule and total factor productivity analysis the methodology is applied to evaluate changes in measured comparative advantage of industries in thailand for the period 1963 76 the results broadly indicate that changes in price competitiveness and in total factor productivity are the major sources of changes in drc ratios for thai industries

exploring the robustness of the balance of payments constrained growth idea in a multiple good framework this paper derives the balance of payments constrained growth bpcg model as a special case of a three good framework that incorporates exportables importables and non tradables the conditions under which the canonical form of the bpcg rate can be derived are made explicit and the assumptions scrutinized it is shown that the presence of nontradables substitutability between exportables and importables and incomplete specialization in expenditure generally dampen the externallyconstrained growth rate these ndings help explain why empirical estimates tend to overestimate the bpcg rate overall our ndings underscore the observation that tests of the bpcg hypothesis are as much a test of the internal structure of the economy under consideration

when are cartels stable contracts why do some industry cartels survive for decades while others are quickly undermined by price wars and entry variation in cartels longevity can be explained by differences in their costs of self enforcement and service value to members analyzing legal cartel contracts formed under the webb pomerene export trade act i find that longer lived cartels tended to export to small buyers to have wide industry coverage to operate in periods of stable prices and growing demand and to sell under side agreements with foreign competitors contracts in which the cartel centralized its control through a common sales agency tended to be more stable however cartels usually grew less stable with age and when there was a recent and long history of cartelization in the industry finally cartels whose primary rationale was to fix price tended to be particularly unstable because these contracts invited fringe competition and entry

economic growth and balance of payments constraint in brazil an analysis of the 1995 2013 period abstract the purpose of this work is to analyze the balance of payments constrained growth in brazil considering thirwall s law 1979 to this end we estimate export and import demand functions using two econometric models vector error correction and structural state space model for the period of 1995 2013 our results suggest that the balance of payments is a constraint to the brazilian economic growth given i the ratio between exports and imports income elasticities ii the low sensitivity of exports to changes in the real exchange rate and iii the evidence that exports are more sensitive to alterations in commodities prices than to changes in the real exchange rate

opportunity cost trade policies and the efficiency of firms abstract this paper analyzes the effects of trade policies on the technological effort of a firm entering a new market in the context of a developing country we depart from previous literature by bringing into focus the opportunity cost of technological effort a firm that spends time in acquiring a more efficient technology delays the commercialization of its products thus incurring an opportunity cost in terms of profits forgone protection increases both the opportunity cost and the benefits from technological effort in the case of linear demand function and constant returns to scale technology protection is shown to unambiguously reduce the protected firm s technological effort export subsidy is also shown to reduce technological effort when the potential level of exports under free trade is high

sub saharan africa s growth south south trade and the generalised balance of payments constraint using the post keynesian balance of payments constrained growth approach we investigate the recent increase in sub saharan africa ssa growth focussing on the contribution of south south trade the model is estimated by panel co integration on a sample of 20 low and lower middle income ssa countries using annual data from 1990 to 2008 and considering three partner areas ssa itself developing asia and the rest of the world the results show that in the past decade the balance of payments constraint of ssa has been relaxed this shift has occurred through different channels of transmission the other ssa countries contributed through the real growth effect developing asia through the market share effect and the rest of the world through the terms of trade effect these results help reconcile puzzling evidence on the pattern of ssa external indebtedness and provide new insights on the role of asian drivers on ssa growth as well as on the sustainability of ssa growth recovery

thirlwall law and balance of payments constrained growth further comment on the debate this paper reviews the debate that has occurred in applied economics over thirlwall s law mccombie 1989 mcgregor and swales 1985 1986 thirlwall 1986 the empired evidence concering the validity of the law is re assessed using a variety of tests including that suggested by mccombie 1989 and the new data set provided by bairam 1988 the law is overwhelmingly rejected by the evidence contrary to the conclusions of mccombie and bairam the rationale for the assumption of constant relative prices which is required to derive thirlwall s law is reconsidered the original law of one price rationale renders the approach incoherent the more recent rationale of sticky oligopolistic price improves the internal consistency of the model but necessitates consideration of non price competition however neither the theory underlying thirlwall s law nor empirical tests of the law property account for this in principle the law cannot be employed to distinguish between demanding constrained and supply co

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

thirlwall s law and balance of payments constrained growth a comment on the debate 1989 thirlwall s law and balance of payments constrained growth a comment on the debate applied economics vol 21 no 5 pp 611 629

differences in income elasticities and trends in real exchange rates abstract one might expect that differences in income elasticities in trade and or differences in growth rates among countries would give rise to strong secular trends in real exchange rates for example fast growing countries might need steady depreciation to get the world to accept their growing exports in fact however income elasticities are systematically related to growth rates by the 45 degree rule under which fast growing countries appear to face high income elasticities of demand for their exports while having low income elasticities of import demand the net effect of this relationship between elasticities and growth rates is that secular trends in real exchange rates are much smaller than one might otherwise have expected relative ppp holds fairly well this paper documents the existence of a 45 degree rule and suggests an explanation in terms of increasing returns and product differentiation

policy designs in a dynamic model of infant industry protection abstract this paper takes the neoclassical infant industry model allows agents to respond to future expectations and reveals previously unexplained relationships between protection and outcome policy which projects to protect the industry until international competitiveness may not necessarily succeed consistent to the mixed empirical evaluations to guarantee success protection has to last longer however for success to be an equilibrium protection can last shorter decline after take off is also an equilibrium when adjustment speed is bounded increasing the protection rate is not isomorphic to decreasing its duration in policy design adjustment speed critical industry scale and policy duration are all relevant

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

a technology gap interpretation of growth paths in asia and latin america abstract this paper presents a north south technology gap model which combines the schumpeterian approach to technical and structural change with the keynesian perspective on effective demand and the balance of payments bop constraint as drivers of growth three are the contributions of the paper first it develops a model in which the technology gap relative productivity and relative wages co evolve and may generate different paths of convergence or divergence between south and north depending on the parameters of the model second the parameters of the model are associated with different types of policies which allows for discussing how these policies may change the growth path finally the model is used to discuss the contrasting experiences of asia and latin america since 1970 convergence in asia and divergence in latin america have been extensively debated topics in the literature on comparative economic development which highlights the crucial role of industrial policy it is argued that the results of the technology gap model are consistent with the findings of this literature and helps understand the forces behind convergence and divergence

bayesian learning in an infant industry model abstract most analyses of the infant industry argument assume that production early on benefits subsequent production in deterministic fashion this paper presents an alternative framework for evaluating the infant industry argument that focuses on imperfect information as a barrier to entry initial entrants provide information of social value by reducing uncertainty for potential followers about the suitability of local conditions in contrast to earlier work i show that factors that increase the informational barrier to entry may lower the optimal subsidy to the infant industry and that the standard test of the success of infant industry policy is not always valid 1997 elsevier science b v

employment and earnings effects of awarding training vouchers in germany participation in intensive training programs for the unemployed in germany is allocated by awarding training vouchers using rich administrative data for all vouchers and actual program participation the authors provide first estimates of the short run and long run employment and earnings effects of receiving a training voucher award based on a selection on observables assumption the results imply that after the award voucher recipients experience long periods of lower labor market success compared to had they not received training vouchers small positive employment effects and no gains in earnings were observed four to seven years after the receipt of the voucher award in addition the findings suggest stronger positive effects both for all low skilled individuals who were awarded and redeemed a voucher and for low skilled and medium skilled individuals who chose to take degree courses than for higher skilled recipients

macroeconomic constraints to growth of the brazilian economy diagnosis and some policy proposals the recent accelerated expansion of the brazilian economy from 2004 to 2007 was driven by exports and gross fixed capital formation although this pace of growth is more robust than it was in the 1990s we can still witness the presence of macroeconomic constraints to its continuation in the long term such as the exchange rate overvaluation particularly since 2005 and in general the modus operandi of monetary policy such constraints may jeopardise the sustainability of the current pace of growth we argue that brazil still lies in a trap made up of high interest and low exchange rates the elimination of the exchange rate misalignment would bring about a large increase in the rate of interest which in turn would impact negatively upon investment and hence upon long term growth we indicate a set of policy measures to eliminate such a trap in particular the adoption of an implicit exchange rate target capital controls and the substitution of the present regime of inflation targeting with a double mandate regime where monetary authorities must pursue two objectives i e output stabilisation and inflation control recent events seem to go in this direction

towards determining nigeria s economic growth path a balance of payments constrained growth approach abstract this paper examines nigeria s long run growth path using the externally and internally constrained version of thirlwall s growth model from 1982 to 2015 the present study modifies the sca bopcg to take into account the effects the foreign contents in exports growth and the domestic investment three stage least squares method is used to obtain the required elasticities for the estimation of the domestic income growth the study affirms the robustness and validity of the modified model in determining the growth path for nigeria the outcome of the empirical study reveals that nigeria s economic growth process is balance of payment constrained even though monetary policies improve growth performance nigeria sustainably grows faster with policies aiming at improving external balance or reducing the import components of demands increasing export share to products with high elasticity of demand as well as keeping budget deficits within the universally acceptable limits

sustainability in a post keynesian growth model for an open economy the paper expands the bop constraint growth model and kaldorian regimes productivity and demand regimes in order to include some of the concerns raised by ecological economics in post keynesian models for open economies the demand regime is modified by taking into account porter s hypothesis which suggests that environmental innovations spurred by environmental policies can foster competitiveness as a result the equilibrium bop constrained rate of growth increases leading to a different version of thirlwall s law which opens room for analyzing the impact of environmental innovations on convergence between developing and developed economies the productivity regime in turn considers the growth and employment implications of innovations in labor productivity standard innovations and environmental efficiency environmental innovations it is argued that the fiscal policy and composition of public expenditure matter for long run growth employment and sustainability

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

history versus equilibrium and the theory of economic growth a model of cumulative causation is developed and the limits of this model as a characterization of historical rather than equilibrium long run growth outcomes are discussed an extension of the model which postulates that cumulative causation occurs in the context of technological and institutional regimes is proposed outcomes in the extended model are shown to be more influenced by history than those in the original model the extended model also addresses a number of recent criticisms of cumulative causation copyright 1997 by oxford university press

growth theory and economic structure new growth theory endogenises growth but neglects aggregate demand and distributional shifts in output and employment a model incorporating demand and structural change is introduced to assess the effects of greater integration of the ec the analysis shows that i the new growth model overstates the long run implications of integration and ii identical effects on productivity growth can be achieved by reducing unemployment it is argued that the benefits of lower unemployment are more certain of achievement than those expected from reduced barriers to trade and resource movement and that stronger demand is a pre requisite for realization of the latter with the rise of the new growth theory romer 1986 many economists foresee the end of the long dominance of neoclassical growth theory new growth theorists make the general point that within their framework the rates of growth of productivity and per capita income and changes in these growth rates are endogenously explained their main criticism of neoclassical growth theory is that it attributes these growth rates to exogenous determinants and that this is not an explanation new growth theory is to be commended for its efforts to endogenize growth but it none the less retains two shortcomings in common with neoclassical growth theory it neglects the effects of 1 distributional shifts in output and employment and 2 aggregate demand in this paper we argue that these must be included in order to develop a research strategy that permits reasonable measures of the impact of policy on growth rates to support this view we first outline the way in which neoclassical and new growth theory analyse and quantify the effects of increased competition and market size using in illustration the 1992 programme for greater economic integration of the ec we then introduce a model that is free of the defects of both approaches and use it to provide a clearer view of the static and dynamic effects of the 1992 changes these are then compared with the effect of policies to reduce unemployment the results show that 1 the new growth model overstates the long run implications of the 1992 measures and 2 identical effects on productivity growth can be achieved by a programme to reduce unemployment we conclude by arguing that the benefits of lower unemploy ment are more certain of achievement that those expected to flow from reduced barriers to trade and resource movement and that stronger demand is a pre requisite if the latter are to be realized we do not attempt to make quantitative estimates of the economic gains from 1992 or from reduced unemployment whether for the short medium or long run rather our paper can be seen as outlining a research strategy for

russia s commercial policy 2008 11 modernization crisis and the wto accession this paper examines the commercial policy of russia during 2008 11 a time of global financial crisis which coincided with an announced russian modernization programme in 2008 russia introduced a development strategy to limit its dependence on natural resources however the government relied heavily on this income for the planned modernization programme the falling price of oil in 2008 9 led to a tightened government budget constraint this situation induced russia towards wider use of more traditional instruments of trade policy such as tariff policy as well as an import substitution strategy the creation of the customs union and a pause in the wto accession process russia has been found by the global trade alert gta initiative to be one of the main users of protectionist policies since november 2008 with the oil price recovery from september 2010 russia had been back in the wto accession process on revised terms and conditions the wto ministerial conference in geneva approved the accession package of the russian federation on 16 december 2011 copyright 2012 oxford university press

competitiveness and industrial policy from rationalities of failure towards the ability to evolve this article elaborates a dynamic rationale of industrial policy focusing on how to strengthen the socio economic system s ability to evolve i e how to achieve high real income together with qualitative change it highlights that the ubiquitous rationalities of failure be it of markets governments or systems are rooted in a peculiar habit of accepting hypothetical perfect states as normative benchmarks in contrast a dynamic logic of intervention should start from the question what the system aims to accomplish combining the structuralist ontology of micro meso and macro with the functional principles of evolutionary change the paper proposes a general typology of economic policies based on their respective contributions to the system s ability to evolve

a structural economic dynamics approach to balance of payments constrained growth this paper derives a balance of payments equilibrium growth rate analogous to thirlwall s law from a pasinettian multi sector macrodynamic framework the resulting formula which we call the multi sectoral thirlwall s law asserts that a country s growth rate of per capita income is directly proportional to the growth rate of its exports with such a proportionality being inversely directly related to sectoral income elasticities of demand for imports exports these income elasticities are weighted by coefficients that measure the share of each sector in total imports and exports respectively it is shown that several theoretical empirical and policy implications can be drawn from such a structural economic dynamics approach to balance of payments constrained growth

nominal contracting and monetary targets drifting into indexation we look for a theoretical justification of nominal wage contracts in household diversification of risk in a calibrated general equilibrium model we find from stochastic simulation that if both productivity and monetary shocks are temporary then optimal wage contracts are overwhelmingly nominal the model suggests that the persistence in monetary shocks not only raises wage protection but also reduces welfare in a world where productivity shocks are persistent as both theory and our empirical results for the oced suggest they are this suggests that this central bank practice is due for review

fixed versus flexible exchange rates which provides more fiscal discipline abstract conventional wisdom holds that fixed rates provide more fiscal discipline than do flexible rates in this paper we show that this wisdom need not hold in a standard model in which fiscal policy is endogenously determined by a maximizing fiscal authority the claim that fixed rates induce more discipline stresses that sustained adoption of lax fiscal policies must eventually lead to an exhaustion of reserves and thus to a politically costly collapse of the peg hence under fixed rates bad behavior today leads to punishment tomorrow under flexible rates bad behavior has costs as well the difference is in the intertemporal distribution of these costs flexible rates allow the effects of unsound fiscal policies to manifest themselves immediately through movements in the exchange rate hence bad behavior today leads to punishment today if fiscal authorities are impatient flexible rates by forcing the costs to be paid up front provide more fiscal discipline and higher welfare for the representative private agent the recent experience of sub saharan countries supplies evidence that matches the predictions of the model

real exchange rate and elasticity of labour supply in a balance of payments constrained macrodynamics a macrodynamic model is proposed in which the real exchange rate and the elasticity of labour supply interact defining different trajectories of growth and income distribution in a developing economy growth depends on imports of capital goods which are paid with exports there are no capital flows and hence is constrained by equilibrium in current account the role of the elasticity of labour supply is to prevent the real exchange rate from appreciating as the economy grows thereby sustaining international competitiveness the model allows for endogenous technological change and considers the impact of migration from the subsistence to the modern sector on the cumulative kaldor verdoorn process of learning copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

thirlwall and balance of payments constrained growth this paper outlines the theory which thirlwall uses to determine the growth of domestic income and argues that crucial elements of this theory appear to be very weak the empirical evidence presented by thirlwall to support his argument for balance of payments constrained growth is considered

outstanding female economists in the analysis and practice of development economics abstract this article examines the contributions of five eminent economists all women to the analysis and practice of development economics irma adelman frances stewart and nancy birdsall are leading advocates of alternative development strategies that focus on poverty alleviation and investment in human capital anne krueger and alice amsden stand at the forefront of two opposing camps in a lively and long lasting debate on the appropriate role of government in trade and industrialization we use the storied careers of these economists as a vehicle to convey the big picture of how development economics has evolved and which topics have proved durable