tax policy asset prices and growth a general equilibrium analysis abstract this paper presents a computable general equilibrium tax policy model that combines a consideration of disaggregate industry effects with an integrated treatment of short and long run adjustments to policy initiatives the model s explicit consideration of forward looking investment decisions and adjustment dynamics permits assessments of short run effects of tax policy on asset values as well as long term impacts on capital accumulation simulations reveal that effects on asset values and investment depend critically on whether policies are oriented toward new or old capital investment tax credits yield significant increases in investment without conferring windfall gains to corporate shareholders corporate tax cuts with the same revenue cost on the other hand yield large windfalls to shareholders while providing only a modest investment stimulus incidence and growth effects differ considerably across sectors particularly between business and housing

testing the long run implications of the neoclassical growth model abstract the long run implications of the one factor neoclassical growth model are tested by investigating the cointegrating relations between the log of output consumption and investment and the real interest rate with the exceptions of austria and the united kingdom the evidence for the united states and to a lesser extent for canada japan and the federal republic of germany is favorable to the neoclassical growth model a simple extension to a multicountry setting proved however to be unsuccessful national outputs nor consumption series are driven by just one common stochastic trend

foreign borrowing and macroeconomic adjustment to external shocks abstract this paper analyzes the impact of anticipated and unanticipated external shocks on the evolution of macroeconomic variables particularly foreign borrowing and on steady state stocks of capital and debt we find that the desired mode of adjustment to a shock is highly sensitive to its nature intertemporal substitution effects often dominate the pure wealth loss effect external disturbances will typically be intertemporally correlated in the real world the paper analyses the resulting implications for the dynamic smoothing of adjustment

a confirmatory analysis of the unit root hypothesis for oecd consumption income ratios this article investigates the existence of a unit root in the consumption income ratio for a sample of 23 oecd countries over the period 1960 to 2005 for that purpose we first use recently developed unit root tests with good size and power second we employ the more powerful panel unit root tests of pesaran 2003 and smith et al 2004 that take the null of nonstationarity and a bootstrap version of the test of hadri 2000 that takes stationarity as the null hypothesis overall our confirmatory analysis renders clear cut evidence that oecd consumption income ratios contain a unit root

cointegration in a macroeconomic system abstract this paper represents an exploratory study that investigates the vector autoregressive properties of a time series system containing six main indicators of the austrian economy gross domestic product gdp private consumption investment gdp deflator interest rate wages interest focuses on cointegrating structures in the system i e on linear combinations of some trending variates that generate stationary series johansen s 1987 procedure identifies three relations of this kind it is also tried to give an economic interpretation to these relations more extensively a variety of sensitivity experiments are performed which make somehow original use of the technique of canonical correlations contrary to the sensitivity experiments a critical assessment of the identified structure by medium term forecasting until 1999 sheds considerable doubt on its correctness at most one or two cointegrating relations may help to increase forecasting precision relative to traditional vector autoregression which do not use the idea of cointegration at all on the other hand using all three identified relations seems to impose excess stationarity on the system which is not replicated by actual data behavior

the costs and benefits of foreign borrowing a survey of multi period models this article surveys the literature on multi period models of foreign borrowing to shed light on the issue of how much a country should borrow and under what circumstances there is a role for public intervention it identifies the essential structural elements of multi period models and draws out the ramifications of the alternative specifications adopted it discusses the insights and shortcomings of three classes of models non optimising optimising borrower and jointly optimising borrower and lender

stochastic growth with correlated production shocks this paper extends the stochastic growth model of brock and mirman j econ theory 4 1972 497 513 to allow the production shocks to be correlated over time the resultant optimal savings and consumption policies depend not only upon the current level of output but also upon the most recent realization of the random shock the properties of these policy functions are studied and it is shown that the markov process on output capital stock and consumption resulting from the application of these policies converges to a stationary distribution

a note on short term intersectoral factor immobility abstract the dynamic trade literature has identified two important aspects of the adjustment process to real shocks contributed to short term intersectoral factor immobilities real income rises over time as the production factors reallocate while the presence of nontradeable goods leads to a dynamic relative price effect while these effects are usually studied separately in the literature this paper presents a simple multi period model with optimizing agents in which both effects operate simultaneously as an illustration of the model the current account response to a favorable endowment shock is studied the two effects have an opposite impact on the direction of the current account response the relationship between model parameters and the response to the shock is studied

how great are the great ratios the balanced growth and neoclassical stochastic growth literatures imply stationarity of certain macroeconomic great ratios four such ratios are considered consumption output investment output the real interest rate and real money supply growth and evidence for ratio stationarity in the g7 countries is examined univariate unit root and stationarity tests are performed and analysis of the cointegrating relations between output consumption and investment is conducted almost no evidence of stationarity is found for the consumption output and investment output great ratios empirical evidence supports real money supply growth stationarity but is more mixed for the real interest rate

structural change and the macroeconomic effects of oil shocks empirical evidence from the united states and japan abstract this paper investigates whether the usa and japan have become better insulated from oil price disturbances due to more favorable structural conditions new production technologies allowing greater energy substitution the development of energy commodity markets reduced energy intensity of production more market oriented energy policies and so on we decompose the influences of oil shocks on real gnp growth and inflation movements in the context of a simultaneous equation model where identification is partly achieved by restricting the long run dynamics we find that oil shocks accounted for a greatly reduced fraction of real gnp growth and inflation variance in both countries primarily because of superior insulation characteristics rather than reduced importance of oil disturbances our estimates suggest that a similar percentage oil price hike would have exerted about one quarter the contractionary effect on real gnp and upward push in inflation in the 1980s compared with the previous two decades jel e31 e32 f30

sectorial wages and the real exchange rate abstract this paper considers a multi sector economy subject to exogenous demand shocks that alter the equilibrium structure of relative prices and relative wages contracts set nominal wages in advance of the realization of stochastic shocks formulae for optimal sectorial wages indexation rules are provided these optimal rules alter the absolute and the relative structure of sectorial nominal wages the rules depend on the heterogeneity of the skill distribution the effects of shocks on the real exchange rate and on real wages are determined and the limited role of second best nominal exchange rate policy is analyzed

the general equilibrium costs and impacts of oil price shocks in newfoundland and labrador abstract the 2014 2015 dramatic drop in world oil prices had devastating impacts on a global scale we analyse economic costs and impacts of a negative oil price shock following the 2014 2015 decrease in oil prices on the provincial economy of newfoundland and labrador canada we use a dynamic computable general equilibrium model to estimate a drop in oil prices by inputting the estimated effect as a direct impact to royalties which are the land input in the oil and gas sector of the provincial economy we provide sensitivity to account for the duration and magnitude of the shock as well as the timing of recovery our results suggest that a shock in the price of oil will have its most significant impact on gdp in the initial years over the first five years the reduction in gdp due to this shock would be roughly 2 1 of gdp in our most realistic shock scenario but could be much higher in other scenarios considered a sharp drop in gdp over the first five years will be mitigated somewhat in the long run as the growth in oil prices rises however negative long run impacts to gdp persist due to the oil price shock in 2014 2015 and will worsen if there is a prolonged shock

tariffs employment and the current account real wage resistance and the macroeconomics of protectionism using a standard complete specialization model of a small open economy within a rigorous intertemporal optimization framework and with contract based wage rigidity we show that permanent tariffs lead to a current account deterioration and a fall in employment contradicting most of the literature on macroeconomic effects of import tariffs the crucial factor in this complete reversal of standard results is the impact of tariffs on domestic real product wages via wage indexation temporary tariffs will have less of a negative impact on the ca or potentially even a positive impact because they increase the consumption rate of interest the terms at which future consumption can be traded for current consumption and so increase private savings extensions towards incorporating a more general production structure investment and the use of tariff revenues to provide wage subsidies are presented this abstract was borrowed from another version of this item

dynamics of electricity consumption oil price and economic growth global perspective this study uses the data from 157 countries from 1960 to 2014 to analyze the relationship between economic growth electricity consumption oil prices capital and labor the economic growth of developing countries with industrial infrastructure has a more significant association with electricity consumption than oil prices we use oil prices and electricity consumption jointly to study highly predictive observations for economic growth the data are categorized by income oecd and regional levels the panel cointegration long run parameter estimation and pool mean group tests are used to analyze the cointegration and short run and long run relationships between the variables the empirical results indicate the presence of cointegration between the variables the presence of feedback effects between electricity consumption and economic growth oil prices and economic growth is valid these findings confirm that in spite of the oil prices developing countries rely heavily on electricity consumption for economic growth in the short run growth and feedback effects suggest that more vigorous electricity policies should be implemented to attain sustainable economic growth for the long term

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

the dutch disease a disease after all many third world oil producers are encountering serious problems in building up a diversified export base while west european oil and gas producers netherlands united kingdom are suffering a decline in their traded goods manufacturing sector induced by real wage pressures it is becoming increasingly clear that high but temporary oil revenues may be somewhat ora mixed blessing the quip of the economist notwithstanding the mechanism behind this unbalance is clear enough part of the oil revenues is spent on non traded goods which leads to a real appreciation i e a rise in the relative price of non traded goods in terms of traded goods this in turn draws resources out of the non oil traded sector into the non traded goods producing sector corden and neary 1982 van wijnbergen 1980 one may say that this is an efficient response to the increase in income from oil production the united kingdom mexico egypt simply should move into oil derived industries and non traded goods and forget about their manufacturing sector until oil reserves are exhausted however many developing countries are hesitant to take this advice after all the post world war ii success stories in economic development involve without exception countries that promoted their traded goods sector aggressively moreover it is a well established stylised fact that technological progress is faster in the traded non sheltered sectors of an economy than in the non traded sector balassa 1964 is an early reference considering the hypothesis that technological progress rather than taking place exogenously with the passage of time is a function of accumulated experience the concern of countries like egypt mexico or indonesia is much easier to understand since solow 1957 and denison 1962 it is known that capital accumulation explain only a small part of economic growth if most of economic growth is caused by learning by doing induced technologica

the linkage between oil price shocks and economic growth with inflation in the presence of technological advances a cge model abstract this study examines whether oil price shocks are inflationary in the us we increase the price of oil in the year 2000 in a manner consistent with the oil price shock of 1973 74 and let the economy experience a hicksian technological change then using a dynamic computable general equilibrium cge model we conduct our analyses under two separate cases 1 regular economic growth and 2 low economic growth we also run three technological scenarios 1 no technology change 2 technological advances in the manufacturing and refining sectors and 3 technological advances in the manufacturing refining chemical and service sectors the effects of these changes are analyzed over the next 20 years until the year 2020 our results suggest that while a shock of the magnitude experienced in the 1970s will have a fairly severe effect on such things as gasoline and refinery prices the aggregate price changes will be largely dissipated over time at the aggregate level furthermore the aggregate level of prices cpi and ppi will fall over time as the level of technological advances rise under both growth scenarios there are several reasons why we would obtain such results first of all the structure of the us economy has changed remarkably since the early 1970s rather than being a manufacturing based economy the us is largely a service based economy today and hence it is more protected form raw materials shortages second the economy has had a steady history of strong growth and the faster an economy grows the quicker disruptions to that economy are dissipated finally our economy is experiencing rapid technological advances in information systems which have served to reduce costs and maintain output in a wide number of economic sectors

a note on cross country growth regressions a large and growing literature searches for the determinants of economic growth employing cross country regression analysis this approach implicitly assumes that countries possess similar structu

productivity shocks non traded goods and optimal capital accumulation this paper considers the interaction of saving and investment in determining the current account for a small open economy subjected to productivity shocks by emphasizing the distinction between traded and non traded goods the analysis highlights the crucial role of the real exchange rate in macroeconomic adjustment our results demonstrate the importance of intertemporal substitution for determining the response of investment to anticipated productivity disturbances we also show how the correlation of movements in saving and investment following an anticipated disturbance depends critically on relative sectoral factor intensities

credibility real interest rates and the optimal speed of trade liberalization abstract this paper investigates the effects of imperfectly credible trade liberalization programs on welfare and the allocation of resources we present a rational expectations model in which a government with limited access to international borrowing will abort a liberalization program if hard currency reserves are depleted too quickly the liberalization s lack of perfect credibility acts as a distortion which becomes rationally intensified under the typical first best policy of immediate liberalization a more gradual lowering of trade barriers leads to higher welfare and a greater probability that the program succeeds we derive the optimal speed of liberalization and the endogenous level of credibility

energy prices substitution and optimal borrowing in the short run an analysis of adjustment in oil importing developing countries this paper builds a normative framework to evaluate three questions to what extent the increases in indebtedness of developing countries was excessive or simply the result of a perfectly rational strategy what borrowing strategies can be expected in the future as the developing countries revise their expectations about the length of time between shocks what is the derived demand to be faced by multilateral institutions providing some amount of concessionary credit the framework used here consists of a short term model traded and nontraded goods prices are flexible and the exchange rate is allowed to float an optimal borrowing rule is derived by maximizing a welfare function over the planning period that period defined by the expected number of years of oil price stability after the shock is short

the potential benefits and costs of an increase in us gasoline tax abstract this paper examines the impact that an increase in the tax on gasoline would have on the us economy that is in the context of a general equilibrium model the effect that a 15 gallon increase in the tax on gasoline would have on producing sectors consuming sectors households and the government is estimated the results suggest that there will be a reduction in output by all producing sectors by about 9 4 billion there will be a fall in the consumption of goods and services by about 9 6 billion and there will be a decline in aggregate social welfare measured as utility by about 15 0 billion the government will realize an increase in revenue of about 8 0 billion

oil price capital mobility and oil importers a general equilibrium macro analysis abstract a three region three commodity general equilibrium model is constructed to explore the impact of opec s pricing policies on major macro variables of importer economies the aim of this paper is to explore general macro characteristics of the trading economies to aid understanding of the world economy response after opec i and opec ii in terms of the evolution of north south terms of trade rates of profit and output levels we support the view of a world economy in a three regions setting north south opec the analysis increases our understanding of why regions respond differently to the same external shock and how from different regimes of capital mobility we should derive alternative policy implications with the current rise in oil prices the topic promises to be relevant for some time although the direction of the shocks has been reserved

foreign debt balance of payments and growth prospects the case of the republic of korea 1965 1988 the rapid buildup in the external debt of the developing countries since 1973 has created serious economic and political difficulties that could frustrate the development efforts of these countries and threaten the international financial system in terms of outstanding debt the republic of korea ranks fourth among third world borrowers and has experienced a noticeable deterioration in its debt servicing capacity yet at the same time it is widely recognized that the country has successfully adjusted to a series of adverse external developments since 1973 and in the process has maintained growth momentum while avoiding the financial difficulties other countries now face the exceptional performance of its economy in recent years supports this assessment the purpose of this study is twofoid the first is to analyze korea s experience with debt accumulation and management over the past two decades with a view to identifying some of the factors that may explain its successful debt management the second objective is to examine the prospects of the national economy for the 1984 88 period section 2 discusses profiles of the country s external obligations and analyzes several aspects of the outstanding debt pertinent to the discussion section 3 is devoted to a discussion of the evolution and causes of the country s foreign debt accumulation this discussion is followed by a review of its response to external and internal shocks in sections 4 and 5 section 6 examines questions related to the efficiency and optimality of foreign borrowing section 7 investigates the prospects of the national economy for the next five years for this purpose this section highlights some of the target revisions made in 1983 for the remainder of the fifth five year economic and social deveiopment plan 1982 86 and the government s macroeconomic projections through 1988 comparisons are made with simulation exercises under a number of scenarios that generate projections for the economy until 1990 a summary and concluding remarks constitute the final section

an economic analysis of technology in the meat products industry the meat products industry underwent significant structural change during the last two decades the relocation and expansion of commercial cattle feeding stimulated development of new single species slaughtering facilities to replace older multi species plants an essentially new processing industry arose specializing in breaking and packaging carcasses this forward integration has significantly changed distribution methods of slaughtering and fabricating firms increased emphasis on coordination of inputs led to interest in backward integration from packing into cattle feeding the steer and heifer slaughtering sector which was decentralized and competitive in the 1950s has turned toward centralization and concentration although the largest firm accounted for only 13 of total u s steer and heifer slaughter in 1977 it had more than doubled its share since 1970 in 1978 this firm slaughtered more than twice as many steers and heifers as its nearest competitor in addi

input substitution in manufacturing for three ldcs translog estimates and policy implications demand and subsititution elasticities from a translog cost model are estimated for the manufacturing sectors of india pakistan and bangladesh conventional formulae for the standard errors of the estimated elasticities are checked by a bootstrap experiment and their validity is confirmed for the moderate sized samples of india and pakistan the elasticity estimates indicate a high degree of substitutability among capital labour and energy resources in manufacturing sectors of these countries the result yields important policy implications for employment expansion through changing relative resource prices and the ability of these three economies to adjust to energy price shocks without serious impairment to economic growth

international evidence on the long run implications of the neoclassical growth model quarterly data from the international finance statistics of the international monetary fund is used to test the long run implications of the neoclassical stochastic growth model for ten oecd countires canada france germany italy the netherlands norway switzerland japan the united kingdom and the united states in doing so johasen s maximum likelihood approach for estimating and testing long run stedy state relations in multivariate vector autoregressive models is used johansen s 1988 statistical analysis of cointegration vectors journal of economic dynamics and control 231 54