the impact of exports on economic growth it s the market form abstarct this paper unites explanations about the growth effects from various trade characteristics proposing the market form into which a country exports as the main driver exporting into concentrated world markets oligopolies or monopolies leads to higher profit margins similar to fundamental microeconomic logic the paper develops an index measuring the average market form of a country s exports this index produces a positive and statistically significant coefficient in conventional growth regressions a one standard deviation increase is suggested to raise growth by 0 885 percentage points this result holds for numerous extensions and seems particularly important for developing economics

money and prices under uncertainty we study whether monetary economies display nominal indeterminacy equivalently whether monetary policy determines the path of prices under uncertainty in a simple stochastic cash in advance economy we find that indeterminacy arises and is characterized by the initial price level and a probability measure associated with state contingent nominal bonds equivalently monetary policy determines an average but not the distribution of inflation across realizations of uncertainty the result does not derive from the stability of the deterministic steady state and is not affected essentially by price stickiness nominal indeterminacy may affect real allocations in cases we identify our characterization applies to stochastic monetary models in general and it permits a unified treatment of the determinants of paths of inflation copyright 2005 wiley blackwell

optimal monetary policy in a small open economy with home bias we analyze optimal monetary policy in a small open economy characterized by home bias in consumption peculiar to our framework is the application of a ramseytype analysis to a model of the recent open economy new keynesian literature we show that home bias in consumption is a su cient condition for inducing the monetary policy maker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some optimal degree of exchange rate stabilization we focus on the optimal setting of policy both in the case of rms setting prices one period in advance and in a gradual fashion subject to adjustment costs while the rst setup allows us to analytically highlight home bias as an independent source of equilibrium

are any growth theories robust this article investigates the strength of empirical evidence for various growth theories when there is model uncertainty with respect to the correct growth model using model averaging methods we find little evidence that so called fundamental growth theories play an important role in explaining aggregate growth in contrast we find strong evidence for macroeconomic policy effects and a role for unexplained regional heterogeneity as well as some evidence of parameter heterogeneity in the aggregate production function we conclude that the ability of cross country growth regressions to adjudicate the relative importance of alternative growth theories is limited despite the vast amount of empirical research generated by new growth theories there is remarkably little consensus on which mechanisms are most salient in explaining cross country differences this article is designed to provide some evidence on this question by examining the robustness of empirical support for different growth the ories as determinants of both aggregate growth and its underlying components total factor productivity tfp growth and physical and human capital accumulation one reason for the lack of empirical consensus on growth determinants is that the main statistical tool in empirical studies cross country growth regressions provides very different answers depending on how the regression is specified which for this context typically amounts to the choice of control variables individual papers typically employ regressions that include modest subsets of the body of regressors that have been pro posed in the literature as a whole others employ a kitchen sink approach to evaluate the relative evidentiary support of competing growth theories in such an exercise a large number of variables are included in a regression and those variables that prove to be significant are then declared to be the important determinants of growth while the others are dismissed as unimportant rodrik et al 2002 sachs 2003

from malthusian stagnation to modern growth this paper investigates the historical evolution of the relationship among population growth technological change and standard of living the analysis focuses on two most important differences among the malthusian regime post malthusian regime and modern growth regime these were the behavior of income per capita and the relationship between the level of income per capita and the population growth rate the modern growth regime is characterized by steady growth in both income per capita and the level of technology in the malthusian regime technological progress and population growth was glacial by modern standards and income per capita was fairly constant in contrast to the modern growth regime the relationship between per capita income and population growth in the malthusian regime was positive post malthusian regime shared one characteristic with each of the two regimes in addition this paper developed and described an endogenous growth model consistent with the above mentioned transition process

openness and optimal monetary policy abstract we show that the composition of international trade has important implications for the optimal volatility of the exchange rate above and beyond the size of trade flows using an analytically tractable small open economy model we characterize the impact of the trade composition on the policy trade off and on the role played by the exchange rate in correcting for price misalignments contrary to models where openness can be summarized by the degree of home bias we find that openness can be a poor proxy of the welfare impact of alternative monetary policies using input output data for 25 countries we document substantial differences in the import and non tradable content of final demand components and in the role played by imported inputs in domestic production the estimates are used in a richer small open economy dsge model to quantify the loss from an exchange rate peg relative to the ramsey policy conditional on the composition of imports we find that the main determinant of the losses is the share of non traded goods in final demand

natural disasters and human capital accumulation the empirical literature on the relationship between natural disaster risk and investment in education is inconclusive model averaging methods in a framework of cross country and panel regressions show an extremely robust negative partial correlation between secondary school enrollment and natural disaster risk this result is driven exclusively by geologic disasters exposure to natural disaster risk is a robust determinant of differences in secondary school enrollment between countries but not necessarily within countries natural disasters human capital education school enrollment bayesian model averaging

price stability in open economies this paper studies the conditions under which price stability is the optimal policy in a two country open economy model with imperfect competition and price stickiness special conditions on the levels of country specific distortionary taxation and the intratemporal and intertemporal elasticities of substitution need to be satisfied these restrictions apply to both cooperative and non cooperative settings most importantly we show that cooperative and non cooperative solutions do not coincide despite market completeness and producer currency pricing in this framework our analysis suggests a role for international policy coordination

failure to launch the role of land inequality in transition delays recent work in the growth literature has provided various explanations for transition delays and the great divergence this paper provides empirical support for one theory of transition delays initial land inequality our analysis is designed to elucidate the channels via which land inequality can affect long run economic performance using a new historical data set for land inequality frankema 2009 we employ duration analysis to investigate whether higher levels of land inequality lead to longer delays in the extension of primary schooling we then investigate whether such delays affect long run economic performance via their effect on contemporaneous schooling our findings suggest that land inequality is a key determinant of delays in schooling and that such delays have a significant negative impact on long run output

how to use interaction terms in bma reply to crespo cuaresma s comment on masanjala and papageorgiou 2008 jesus crespo cuaresma how different is africa a comment on masanjala and papageorgiou journal of applied econometrics 2011 shows that the results in masanjala and papageorgiou rough and lonely road to prosperity a reexamination of the sources of growth in africa using bayesian model averaging journal of applied econometrics 2008 23 5 671 682 are sensitive to an alternative prior model structure in considering interaction terms as a side issue the algorithm for averaging over models is also challenged in this reply i show that the prior used in masanjala and papageorgiou is as sensible as the prior suggested by crespo cuaresma what we learn from crespo cuaresma s comment and this reply is that further effort should be dedicated to the study of parameter heterogeneity in the framework of bma methods copyright 2011 john wiley sons ltd

volatility growth and welfare this paper constructs an endogenous growth model driven by self ful lling expectation shocks to explain the stylized fact that the average growth rate of gdp is related negatively to volatility and positively to capacity utilization the implied welfare gain from further stabilizing the u s economy is about a quarter of annual consumption which is consistent in order of magnitude with estimates based on the empirical studies of ramey and ramey 1995 and alvarez and jermann 2004 hence policies designed to reduce uctuations can generate large welfare gains because smaller uctuations are associated with permanently higher rates of growth

rough and lonely road to prosperity a reexamination of the sources of growth in africa using bayesian model averaging this paper takes a fresh look at africa s growth experience by using the bayesian model averaging bma methodology bma enables us to consider a large number of potential explanatory variables and sort out which of these variable can effectively explain africa s growth experience posterior coefficient estimates reveal that key engines of growth in africa are substantially different from those in the rest of the world more precisely it is shown that mining primary exports and initial primary education exerted differential effect on african growth these results are examined in relation to the existing literature copyright 2008 john wiley sons ltd

determinants of regional economic growth by quantile crespo cuaresma j foster n and stehrer r determinants of regional economic growth by quantile regional studies the robustness of growth determinants across european union regions is analysed using quantile regression using bayesian model averaging bma on the class of quantile regression models it is proposed that the set of relevant covariates is assessed allowing for different effects across growth quantiles the results indicate that the robust growth determinants differ across quantiles the set of robust variables includes physical investment when taking country fixed effects into account and skill endowment and initial gross domestic product per capita when not even when a variable is found to be robust across quantiles its estimated impact on growth is often found to vary across quantiles crespo cuaresma j foster n et stehrer r les determinants de la croissance economique par quantile regional studies a partir d une regression par quantile on analyse la solidite des determinant

optimal interest rate stabilization in a basic sticky price model this paper studies optimal monetary policy with the nominal interest rate as the single policy instrument firms set prices in a staggered way without indexation and real money balances contribute separately to households utility the optimal deterministic steady state under commitment is the friedman rule even if the importance assigned to the utility of money is small relative to consumption and leisure we approximate the model around the optimal steady state as the long run policy target optimal monetary policy is characterized by stabilization of the nominal interest rate instead of inflation stabilization as the predominant principle

unions power collective bargaining and optimal monetary policy we study ramsey policies and optimal monetary policy rules in a model with sticky prices and unionized labour markets collective wage bargaining and unions monopoly power dampen wage uctuations and amplify employment uctuations relatively to a dnk model the optimal

optimal inattentive length in macroeconomic models abstract this paper proposes an approximate solution of firm s optimal inattentive length in a standard macroeconomic model the approximate solution conceptually fits a sticky information model better and predicts empirically more plausible inattentive length than the one proposed by reis reis r 2006 inattentive producers review of economic studies 73 793 821

gaps and triangles we derive principles of optimal short run monetary policy in a real business cycles model with money and prices set in advance the optimal allocation is achieved under the friedman rule however given that policy the allocation is indeterminate we move away from the friedman rule take the interest rate path as exogenous and characterize the optimal money supply policy we identify the conditions under which it is optimal to replicate the allocation under exible prices in general sticky prices provide the planner with tools to improve upon a distorted exible prices allocation

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

mutual funds flows and the geography of contagion abstract this paper studies the dynamics and geography of investments made by international mutual funds located in advanced markets i identify precise global and regional dynamics in equity and bond flows very few countries receive or lose funding in isolation i also find strong evidence of global contagion when financial conditions in developed markets change emerging markets funding is heavily affected i illustrate this finding by deriving contagion maps showing where contagion spreads and with what intensity in general the results suggest that push effects from advanced market investors affect massively developing countries and expose them to sudden stops and surges

optimal central bank lending abstract we analyze optimal monetary policy in a sticky price model with open market operations the central bank sets the policy rate and can additionally control the amount of money by rationing money supplied against eligible securities optimal policy under money rationing is shown to enhance welfare in the long run and in the short run compared to a conventional optimal policy regime where money supply is not rationed and satiates money demand specifically this property is shown to apply when privately issued debt is eligible in open market operations which allows the central bank to separately alter costs of borrowing and the size of transactions for which money is required

determinants of sovereign yield spreads in the eurozone a bayesian approach abstract we analyze the determinants of sovereign yields spreads of emu member states applying bayesian model averaging bma to annual panel data from 1999 to 2009 bma is well suited in cases of small samples and high model uncertainty this seems to be the case in modeling sovereign yield spreads in the eurozone since the literature reports heterogeneous results with respect to significant explanatory variables we are testing a number of variables reported to be significant in the literature and find that the most likely country specific drivers of yield spreads are fiscal variables such as budget balance and government debt as well as external sector variables such as terms of trade trade balance and openness global financing conditions indicated by the us interest rate and market sentiments indicated by corporate bond spreads are likely to influence sovereign yield spreads

empirics of hills plateaus mountains and plains a markov switching approach to growth abstract most economic growth research has been aimed at explaining cross country differences in average growth rates however it is well known that growth experiences differ over time within a country almost as much as they differ among countries this paper builds on pritchett s 2000 pritchett lant understanding patterns of economic growth searching for hills among plateaus mountains and plains world bank economic review may 2000 14 2 221 250 observation that the growth process can be thought of as transitions between different growth regimes and proposes a framework for systematic analysis of such regimes and the dynamics of the transitions i estimate a markov switching regression to characterize four distinct growth regimes and transitions between them the results show that countries switch among regimes of stable growth miracle catch up stagnation and crisis with the transition probabilities determined by the quality of institutions better institutions appear to improve long run growth by making episodes of fast growth more persistent low average growth rates in countries with weak institutions are a result of these countries spending more time in stagnation regimes rather then being incapable of fast growth at all weak institutions do not rule out growth takeoffs but limit their sustainability the approach directs attention to shifts in growth performance and highlights the fact that identical average growth rates can mask very distinct growth paths

robust monetary policy with competing reference models abstract the existing literature on robust monetary policy rules has largely focused on the case in which the policymaker has a single reference model while the true economy lies within a specified neighborhood of the reference model in this paper we show that such rules may perform very poorly in the more general case in which non nested models represent competing perspectives about controversial issues such as expectations formation and inflation persistence using bayesian and minimax strategies we then consider whether any simple rule can provide robust performance across such divergent representations of the economy we find that a robust outcome is attainable only in cases where the objective function places substantial weight on stabilizing both output and inflation in contrast we are unable to find a robust policy rule when the sole policy objective is to stabilize inflation we analyze these results using a new diagnostic approach namely by quantifying the fault tolerance of each model economy with respect to deviations from optimal policy

the importance of the exchange rate regime in limiting current account imbalances in sub saharan african countries abstract one of the major current concerns of economic policy in developing countries is the choice of the appropriate exchange rate regime to consolidate and accelerate the pace of economic growth this paper aims to investigate whether the choice of a country s exchange rate regime may affect current account imbalances for sub saharan african economies to this end we first use bayesian model averaging bma supplemented by the general to specific gets method to address concerns about model uncertainty and identify the key determinants fundamentals of external balances then estimating current account imbalances over the period 1980 2012 we show that flexible exchange rate regimes are more effective in preventing such disequilibria consequently candidates for membership of monetary unions should discuss widely the possible adjustment mechanisms before forming such unions one potential measure is the sharing of external risks at the regional level

the monetary transmission mechanism is it relevant for policy we study environments with sticky prices wages or portfolios where it is feasible and optimal to use monetary policy to replicate the allocation under full flexibility in these environments the optimal policy does not depend on the scope of the frictions in this sense the strength of the monetary transmission mechanism is irrelevant for the conduct of monetary policy so asymmetries in the strength of the transmission mechanisms do not impose a cost on a common policy jel e31 e41 e58 e62

monetary policy and welfare in a small open economy this paper analyzes optimal monetary policy in a small open economy featuring monopolistic competition and nominal rigidities it shows that the utility based loss function for this economy can be written as a quadratic expression of domestic inflation output gap and real exchange rate the presence of an internal monopolistic distortion and a terms of trade externality drives optimal policy away from domestic inflation targeting and affects the optimal level of exchange rate volatility when domestic and foreign goods are close substitutes for each other the optimal policy rule implies lower real exchange rate volatility than a domestic inflation targeting regime the reverse is true when the elasticity of substitution between goods is low

robust determinants of intergenerational mobility in the land of opportunity abstract this paper revisits the influential work by chetty et al 2014 who attempt to explain the variation in intergenerational mobility across commuter zones in the us i e spatial mobility using nine classes of variables we employ bayesian model averaging methods that allow for model uncertainty to identify robust predictors of spatial mobility in doing so we pay special attention to the specification of model and parameter priors we also investigate the heterogeneous effects of these predictors on spatial mobility across commuter zones in different average income quintiles our findings suggest a more nuance and complex characterization of the spatial mobility process than that proposed by chetty hendren kline and saez

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

growth convergence and public investment a bayesian model averaging approach the aim of this study is twofold first the determinants of economic growth are studied among a wide set of potential variables for the spanish provinces nuts3 among others various types of private public and human capital in the group of growth factors are included also it is analysed whether spanish provinces have converged in economic terms in recent decades the second objective is to obtain cross section and panel data parameter estimates that are robust to model specification for this purpose a bayesian model averaging bma approach is used bayesian methodology constructs parameter estimates as a weighted average of linear regression estimates for every possible combination of included variables the weight of each regression estimate is given by the posterior probability of each model

growth econometrics for agnostics and true believers abstract the issue of model uncertainty is central to the empirical study of economic growth many recent papers use bayesian model averaging to address model uncertainty but ciccone and jarocinski 2010 have questioned the approach on theoretical and empirical grounds they argue that a standard agnostic approach is too sensitive to small changes in the dependent variable such as those associated with different vintages of the penn world table pwt this paper revisits their theoretical arguments and empirical illustration drawing on more recent vintages of the pwt and introducing an approach that limits the degree of agnosticism

optimal fiscal and monetary policy equivalence results in this article we analyze the implications of price setting restrictions for the conduct of cyclical fiscal and monetary policy we consider standard monetary economies that differ in the price setting restrictions imposed on the firms we show that independently of the degree or type of price stickiness it is possible to implement the same efficient set of allocations and that each allocation in that set is implemented with policies that are also independent of the price stickiness in this sense environments with different price setting restrictions are equivalent

push factors and capital flows to emerging markets why knowing your lender matters more than fundamentals abstract countries gross capital inflows are not equally affected by changes in global conditions analyzing 21 advanced countries acs and 33 emerging markets ems between 2001 and 2015 we confirm that co movements in capital inflows are concentrated in bank portfolio bond and portfolio equity flows to ems however changes in global factors do not affect all ems equally even for the same type of flow investigating the characteristics of these sensitivities we find that ems relying more on global mutual funds are more sensitive in their gross equity and bond inflows recipient market liquidity and inclusion in global market indices also increase sensitivities but we find little robust evidence that institutional and macroeconomic fundamentals dampen sensitivities

ramsey monetary policy with labor market frictions abstract traditional new keynesian models prescribe that optimal monetary policy should aim at price stability in the absence of a labor market frictions the monetary authority faces no unemployment inflation trade off the design of optimal monetary policy is analyzed here for a framework with sticky prices and matching frictions in the labor market optimal policy features deviations from price stability in response to both productivity and government expenditure shocks when the hosios 1990 on the efficiency of matching and related models of search and unemployment review of economic studies 57 2 279 298 condition is not met search externalities make the flexible price allocation unfeasible optimal deviations from price stability increase with workers bargaining power as firms incentives to post vacancies fall and unemployment fluctuates above the pareto efficient one

the contribution of education to economic growth a review of the evidence with special attention and an application to sub saharan africa summary this paper examines recent studies that estimate the impact of education on economic growth it explains why cross country regressions face formidable econometric problems recent studies are reviewed some show strong impacts of education on economic growth others show little effect all have multiple estimation problems which may explain their divergent results evidence shows that education quality in sub saharan africa is much lower than in other developing countries estimates from three influential studies are extended the results suggest that the impact of education on economic growth in sub saharan africa is lower than in other countries likely due to lower school quality

does urbanization mean bigger governments this paper proposes urbanization as a determinant of government size as people move to cities their demand for a more de ned set of regulations but also for basic health education and income standards rises our theoretical framework determines how the regional distribution of the population a ects government size we test this theory on panel data of 175 countries from 1960 to 2010 and two state level samples from colombia and germany results demonstrate a strong positive e ect from urbanization on government spending with a 1 percent increase in the amount of urban citizens leading to a 0 2 percent rise in public expenditure our ndings indicate that public sectors may become more important as worldwide urbanization is progressing this result underlines why government e ectiveness and the quality of public goods provision will be even more important in the future

unveiling covariate inclusion structures in economic growth regressions using latent class analysis we propose the use of latent class analysis methods to analyze the covariate inclusion patterns across specifications resulting from bayesian model averaging exercises using dirichlet process clustering we are able to identify and describe dependency structures among variables in terms of inclusion in the specifications that compose the model space we apply the method to two datasets of potential determinants of economic growth clustering the posterior covariate inclusion structure of the model space formed by linear regression models reveals interesting patterns of complementarity and substitutability across economic growth determinants

the determinants of vulnerability to the global financial crisis 2008 to 2009 credit growth and other sources of risk abstract in this paper we identify initial macroeconomic and financial market conditions that help explain the distinct response of the real economy of a particular country to the recent global financial crisis using four measures of crisis severity we examine a data set with over 90 potential explanatory factors employing techniques that are robust to model uncertainty four findings are of particular note first we find empirical evidence for the pivotal role of pre crisis credit growth in shaping the real economy s response to the crisis specifically a 1 increase in pre crisis lending translates into a 0 2 increase in the cumulative loss in real output moreover the combination of pronounced growth in lending ahead of the crisis and the country s exposure to external funding from advanced economies is shown to intensify the real downturn economies with booming real activity before the crisis are found to be less resilient to the global shock buoyant growth in real gdp in parallel with strong growth of credit particularly exacerbated the effects of the recent crisis on the real economy finally we provide empirical evidence on the importance of holding international reserves in explaining the response of the real economy to the crisis the accumulation of international reserves mitigated the harmful effects of financial stress on the real economy in particular when domestic funding via credit is abundant the results are shown to be robust to several estimation techniques including those allowing for cross country spillovers

strategic monetary policy in interdependent economies gains from coordination reconsidered abstract there is a wide acceptance that gains to international monetary policy coordination are small at best and that the need of policy coordination is questionable this conclusion however follows from the underlying presumption that monetary policy is concerned with the stabilization of macroeconomic fluctuations only this paper presents a general short run monetary policy analysis within a familiar two country new open economy macroeconomics noem framework where national monetary policy involves the choice of a deterministic growth trend of money supply average inflation rate and stochastic state dependent deviations of actual money supply from the deterministic trend stabilization strategic beggar thy neighbor considerations induce the deviation of both policy choices from their socially optimal values the gains from international coordination of the average inflation rate are of first order and hence larger than the gains from the coordination of the stabilization policies which are of second order

sticky price and limited participation models of money a comparison abstract we provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts after a contractionary monetary policy shock the aggregate price level responds very little aggregate output falls interest rates initially rise real wages decline by a modest amount and profits fall we compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts the key failing of the sticky price model lies in its counterfactual implications for profits the limited participation model can account for all the above facts but only if one is willing to assume a high labor supply elasticity 2 percent and a high markup 40 percent the shortcomings of both models reflect the absence of labor market frictions such as wage contracts or factor hoarding which dampen movements in the marginal cost of production after a monetary policy shock 1997 elsevier science b v

who benefits from financial development new methods new evidence abstract this paper takes a fresh look at the impact of financial development on economic growth by using recently developed kernel methods that allow for heterogeneity in partial effects nonlinearities and endogenous regressors our results suggest that while the positive impact of financial development on growth has increased over time it is also highly nonlinear with more developed nations benefiting while low income countries do not benefit at all we also conduct a novel policy analysis that confirms these statistical findings in sum this set of results contributes to the ongoing policy debate as to whether low income nations should scale up financial reforms

looking for a needle in a haystack revisiting the cross country causes of the 2008 9 crisis by bayesian model averaging in this paper we explore the cross country variation in the output impact of the global financial crisis in 2008 9 we use the extensive dataset of rose and spiegel but control for the problems of model uncertainty and outliers by using a variety of bayesian model averaging techniques we find first that cross country differences in crisis intensity can be explained by macroeconomic vulnerabilities second ignoring model uncertainty can lead to incorrect inferences third international trade linkages do matter

the impact of data revisions on the robustness of growth determinants a note on determinants of economic growth will data tell summary ciccone and jarocinski american economic journal macroeconomics 2010 2 222 246 show that inference in bayesian model averaging bma can be highly sensitive to small data perturbations in particular they demonstrate that the importance attributed to potential growth determinants varies tremendously over different revisions of international income data they conclude that agnostic priors appear too sensitive for this strand of growth empirics in response we show that the found instability owes much to a specific bma set up first comparing the same countries over data revisions improves robustness second much of the remaining variation can be reduced by applying an evenly agnostic but flexible prior copyright 2012 john wiley sons ltd

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

model averaging in economics an overview standard practice in empirical research is based on two steps first researchers select a model from the space of all possible models second they proceed as if the selected model had generated the data therefore uncertainty in the model selection step is typically ignored alternatively model averaging accounts for this model uncertainty in this paper i review the literature on model averaging with special emphasis on its applications to economics finally as an empirical illustration i consider model averaging to examine the deterrent effect of capital punishment across states in the usa

the resource curse revisited a bayesian model averaging approach abstract the evidence for the effects of oil rents on growth is mixed a result which can be explained with model uncertainty we address the issue using bayesian model averaging techniques and an updated cross country data set for long term growth in the period 1970 2014 including 91 countries and 54 potential growth determinants we do not find empirical evidence for the existence of a natural resource curse in our sample on the contrary our results suggest a robust positive effect of oil rents on long term economic growth we then introduce interaction terms of oil rents with potential conditions under which oil dependency can lead to sub standard growth the results indicate that the positive effect of oil rents may be conditional on the quality of institutions we test the robustness of our results using a panel data set and find neither a curse nor a positive effect of oil rents on short to medium run growth

growth empirics in panel data under model uncertainty and weak exogeneity this paper considers panel growth regressions in the presence of model uncertainty and reverse causality concerns for this purpose my econometric framework combines bayesian model averaging with a suitable likelihood function for dynamic panel models with weakly exogenous regressors and xed eects an application of this econometric methodology to a panel of countries over the 1960 2000 period highlights the diculties in identifying the sources of economic growth by means of cross country regressions in particular none of the nine candidate regressors considered can be labeled as a robust determinant of economic growth moreover the estimated rate of conditional convergence is indistinguishable from zero

the effect of measurement error on the estimated shape of the world distribution of income abstract this note examines the robustness that two modes exist in the world s density of per capita income our results suggest that this bimodal feature is robust and are arrived at using recently developed nonparametric deconvolution techniques

optimal monetary policy rules with labor market frictions abstract this paper studies optimal monetary policy rules in a framework with sticky prices matching frictions and real wage rigidities optimal policy is given by a constrained ramsey plan in which the monetary authority maximizes the agents welfare subject to the competitive economy relations and the assumed monetary policy rule i find that the optimal rule should respond to unemployment alongside with inflation this is so since models with matching frictions unlike standard new keynesian models feature a congestion externality that makes unemployment inefficiently high a strong response to inflation remains optimal while a response to output is always welfare detrimental

why has africa grown slowly we distinguish between policy and destiny explanations of africa s slow growth during the past three decades policies were poor high export taxation and inefficient public service delivery and destiny was adverse landlocked tropical locations and terms of trade deterioration during the 1990s africa s economic policies improved although with considerable variation both between countries and between policies trade and exchange rate policies improved much more than service delivery thus the differing explanations of past slow growth imply different predictions for growth in the coming decade we argue that poor public economic services are likely to be the binding constraint

sorting through global corruption determinants institutions and education matter not culture abstract identifying the robust determinants of corruption among cultural economic institutional and geographical factors has proven difficult from a policy perspective it is important to know whether inherent largely unchangeable attributes are responsible or if institutional and economic attributes are at work accounting for model uncertainty we use bayesian model averaging bma to analyze a comprehensive list of 36 potential corruption determinants across 123 countries covering 87 percent of the world population the bma methodology sorts through all 68 719 476 736 possible model combinations 2 36 in order to carve out the robust correlates we then take a step toward alleviating endogeneity concerns in an instrumental variable bma framework our results indicate that cultural factors are largely irrelevant whereas particular economic and institutional characteristics matter the rule of law emerges as the most persistent predictor with a posterior inclusion probability pip in the true model of 1 00 whereas we find strong evidence for government effectiveness pip of 0 88 urbanization 0 85 and the share of women in parliament 0 80 as meaningful determinants of lower corruption levels in developing countries the extent of primary schooling enters as a powerful factor with a pip of 1 00

does social capital matter for european regional growth abstract this paper analyzes the role of different elements of social capital in economic growth for a sample of 85 european regions during the period 1995 2008 despite the remarkable progress that social capital and european regional economic growth literatures have experienced over the last two decades initiatives combining the two are few and entirely yet to come for the post 1990s period recent improvements in data availability allow this gap in the literature to be closed since they enable the researcher to consider the traditionally disregarded eastern and central european ece regions this is particularly interesting as they are all transition economies that recently joined the european union with relatively low levels of social capital on the methodological side we follow the bayesian paradigm which enables us to make direct inferences on the parameters to be estimated and deal with parameter uncertainty leading to a deeper understanding of the relationships being investigated in particular we analyze three indicators of social capital namely social trust associational activities and social norms results suggest that the two former might have some implications for regional growth while social norms are a weaker predictor for growth

optimal monetary policy with endogenous entry and product variety deviations from long run price stability are optimal in the presence of endogenous entry and product variety in a sticky price model in which price stability would be optimal otherwise long run inflation deflation is optimal when the benefit of variety to consumers falls short of exceeds the market incentive for creating that variety the desired markup price indexation exacerbates this mechanism plausible preference specifications and parameter values justify positive long run inflation rates however short run price stability around this non zero trend is close to optimal even in the presence of endogenously time varying desired markups that distort the intertemporal allocation of resources

does africa grow differently abstract this paper extends the analysis of african economic growth in two directions first by challenging the assumption that growth effects of particular explanatory variables are the same in africa as elsewhere and second by measuring indirect contributions to growth of initial conditions as they influence explanatory variables in a basic growth regression robust regression analysis shows that for africa being closed to trade is more costly to growth natural resource abundance is more detrimental to institutional development and several factors that reduce population growth and enhance institutional quality outside africa fail to show such beneficial effects within africa

monetary policy and labor market frictions a tax interpretation replicating the flexible price allocation in models with nominal rigidities and labor market frictions that lead to an inefficient matching of unemployed workers with job vacancies even if feasible is generally not desirable we characterize the tax instruments that implement the first best allocation and examine the trade offs faced by monetary policy if these tax instruments are unavailable our tax interpretation helps explain why the welfare cost of inefficient labor market search can be large while the incentive to deviate from price stability is small gains from deviating from price

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

how different is africa a comment on masanjala and papageorgiou masanjala and papageorgiou rough and lonely road to prosperity a reexamination of the sources of growth in africa using bayesian model averaging journal of applied econometrics 2008 23 5 671 682 use bayesian model averaging to evaluate the existence of parameter heterogeneity between african and non african countries in the framework of cross country growth regressions we show that their results are not robust to the use of a prior over the model space that respects the strong heredity principle put forward by chipman for models including interaction terms

is god in the details a reexamination of the role of religion in economic growth summary barro and mccleary 2003 religion and economic growth across countries american journal of sociology 68 760 781 is a key research contribution in the new literature exploring the macroeconomic effects of religious beliefs this paper represents an effort to evaluate the strength of their claims we evaluate their results in terms of replicability and robustness overall their analysis generally meets the standard of statistical replicability though not perfectly on the other hand we do not find that their results are robust to changes in their baseline statistical specification when model averaging methods are employed to integrate information across alternative statistical specifications little evidence survives that religious variables help to predict cross country income differences copyright 2011 john wiley sons ltd

the role of countercyclical monetary policy when firms set nominal prices in advance optimal monetary policy insulates aggregate output against shocks to demand it can do so however by following the constant money growth rule advocated by milton friedman it need not respond to the shocks in an actively countercyclical way in addition to the extent that output fluctuations are driven by shocks to supply money growth should be procyclical

poole in the new keynesian model abstract we study the properties of alternative central bank targeting procedures within the standard new keynesian model we find that poole s famous insights concerning the output stabilization properties of money and interest rate targeting obtain when intertemporal substitution is low and that output volatility rankings do not induce similar welfare rankings unlike the popular presumption money targeting always fares better for money demand shocks for fiscal shocks money targeting does better for low and worse for high degree of intertemporal substitution the opposite pattern obtains for supply shocks

oligopolistic competition and optimal monetary policy abstract this paper studies optimal monetary policy in a dsge model with supply side strategic complementarity as arising from oligopolistic competition and nominal rigidities firms oligopolistic rents induce inefficient fluctuations through both intra temporal and intertemporal time varying wedges optimality requires the use of state contingent inflation taxes to smooth and reduce firms rents hence under optimal ramsey policy ppi deviates significantly from zero a comparison of welfare costs for a set of operational rules relatively to the ramsey plan shows that targeting the output gap the mark up and the asset price improves upon a rule with aggressive response to inflation

a long run structural macroeconometric model of the uk a new modelling strategy that provides a practical approach to incorporating long run structural relationships suggested by economic theory in an otherwise unrestricted var model is applied to construct a small quarterly macroeconometric model of the uk estimated over 1965q1 1999q4 in nine variables domestic and foreign outputs prices and interest rates oil prices the nominal effective exchange rate and real money balances the aim is to develop a model with a transparent and theoretically coherent foundation tests of restrictions on the long run relations of the model are presented the dynamic properties of the model are discussed and monetary policy shocks identified

monetary and macroprudential policies in a leveraged economy we examine the optimal monetary policy in the presence of endogenous feedback loops between asset prices and economic activity when macroprudential policies can also be pursued absent macroprudential policies the optimal monetary policy leans against asset prices and can be closely approximated using a speed limit rule that responds to the growth of financial variables an endogenous feedback loop is crucial for this result price stability is otherwise quasi optimal similarly a simple macroprudential rule that links reserve requirements to credit growth dampens the endogenous feedback loop and leads to near price stability state contingent taxes on lending are shown to be welfare improving

monetary conservatism and fiscal policy abstract does an inflation conservative central bank a la rogoff 1985 remain desirable in a setting with endogenous fiscal policy to provide an answer we study monetary and fiscal policy games without commitment in a dynamic stochastic sticky price economy with monopolistic distortions monetary policy determines nominal interest rates and fiscal policy provides public goods generating private utility we find that lack of fiscal commitment gives rise to excessive public spending the optimal inflation rate internalizing this distortion is positive but lack of monetary commitment generates too much inflation a conservative monetary authority thus remains desirable when fiscal policy is determined before monetary policy each period the monetary authority should focus exclusively on stabilizing inflation monetary conservatism then eliminates the steady state biases associated with lack of monetary and fiscal commitment and leads to stabilization policy that is close to optimal

explaining ethiopia s growth acceleration the role of infrastructure and macroeconomic policy summary ethiopia has experienced an impressive growth acceleration over the past decade this was achieved on the back of an economic strategy emphasizing public infrastructure investment supported by heterodox macro financial policies this paper identifies the drivers of ethiopia s recent growth episode and examines the extent to which they were typical or unique it combines country specific information with the results of a cross country panel regression model we find that ethiopia s growth is explained well by factors correlating with growth in a broad range of countries in recent decades including public infrastructure investment restrained government consumption and a conducive external environment on the other hand we argue that the policy mix that supported very high levels of public investment in ethiopia was to some extent unique interestingly macroeconomic imbalances due to this heterodox policy mix only moderately held back growth which helps explain why ethiopia was able to grow so fast in spite of their presence their negative effects were quantitatively much less important than the positive growth drivers they helped to achieve the results suggest that getting infrastructure right may outweigh moderate shortcoming in the macro framework at early stages of development we further relate this country specific finding to the recent growth literature