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Full-Text Articles in Social and Behavioral Sciences
Sustained Investment Surges, Emiliano Libman, Juan Antonio Montecino, Arslan Razmi
Sustained Investment Surges, Emiliano Libman, Juan Antonio Montecino, Arslan Razmi
Economics Department Working Paper Series
Existing empirical studies have focused on determinants of investment. We focus instead on episodes of accelerated capital stock growth that last eight years or longer. We find that episodes are relatively common, even in low growth regions, but more so in middle income and Asian countries. After identifying 175 such episodes between 1950-2014, we employ probit analysis to explore their characteristics. Turning points in investment tend to be preceded by undervalued real exchange rates, macroeconomic stability (low inflation), and net capital outflows (especially portfolio outflows). We also find strong evidence for a negative correlation with the capital to output ratio …
Correctly Analyzing The Balance Of Payments Constraint On Growth, Arslan Razmi
Correctly Analyzing The Balance Of Payments Constraint On Growth, Arslan Razmi
Economics Department Working Paper Series
The BPCG model provides an interesting hypothesis regarding economic growth. The main implication is that world demand places a constraint on individual country performance. 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 due to demand-side constraints. 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 contribute …
Exploring The Robustness Of The Balance Of Payments- Constrained Growth Idea In A Multiple Good Framework, Arslan Razmi
Exploring The Robustness Of The Balance Of Payments- Constrained Growth Idea In A Multiple Good Framework, Arslan Razmi
Economics Department Working Paper Series
This paper derives the balance of payments-constrained growth (BPCG) model as a special case of a three good framework that incorporates ex- portables, 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 non- tradables, substitutability between exportables and importables, and in- complete specialization in expenditure generally dampen the externally- constrained growth rate. These findings help explain why empirical esti- mates tend to overestimate the BPCG rate. Overall our findings under- score the observation that tests of the BPCG …
The Effects Of Export-Oriented, Fdi-Friendly Policies On The Balance Of Payments In A Developing Economy: A General Equilibrium Investigation, Arslan Razmi
Economics Department Working Paper Series
Many developing countries have adopted investor-friendly policies in recent years in order to attract export-oriented foreign direct investment (FDI). The effects of these policies on the external accounts have been largely ignored. This paper endogenizes FDI inflows in a structuralist general equilibrium framework to contribute towards filling this gap. Our economy consists of: (i) a non-tradable goods sector and (ii) an export processing zone (EPZ) that hosts transnational corporations. The analysis finds that, contrary to widely-shared perceptions, the short-run effects of FDI-friendly policies on the balance of payments may frequently be negative due to the nature of both the investments …
Price Competition And The Fallacy Of Composition In Developing Country Exports Of Manufactures: Estimates Of Short-Run Growth Effects, Robert A. Blecker, Arslan Razmi
Price Competition And The Fallacy Of Composition In Developing Country Exports Of Manufactures: Estimates Of Short-Run Growth Effects, Robert A. Blecker, Arslan Razmi
Economics Department Working Paper Series
This paper studies whether intra-developing country price competition has significant effects on the short-run growth rates of developing countries that are specialized in manufactured exports. Regression estimates using the generalized method of moments (GMM) applied to annual panel data for 17 developing countries in 1983-2004 show that these countries exhibit a “fallacy of composition,” in the sense that a real depreciation relative to competing developing country exporters increases the home country’s growth rate in the short run. The results also suggest that real depreciations for these developing countries relative to the industrialized countries are contractionary.