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Articles 1 - 9 of 9
Full-Text Articles in Social and Behavioral Sciences
Walking The Tightrope Of Real Exchange Rate Policy For Development: The Roles Of Targets, Instruments, And Saving Rates, Arslan Razmi
Walking The Tightrope Of Real Exchange Rate Policy For Development: The Roles Of Targets, Instruments, And Saving Rates, Arslan Razmi
Economics Department Working Paper Series
Real exchange rate policy can potentially be utilized to target the trade balance and/or development through capital accumulation. However, the presence of distributional conflict and the trade-off between current and future trade imbalances complicates matters. I show that policy assignment matters for dynamic stability. Moreover, the relative saving behavior of different functional income groups influences dynamic behavior. The analysis sheds light on why real exchange rate policy may often be unfeasible, even if desirable from a developmental perspective.
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 …
The Real Exchange Rate And Economic Growth: Are Developing Countries Different?, Martin Rapetti, Peter Skott, Arslan Razmi
The Real Exchange Rate And Economic Growth: Are Developing Countries Different?, Martin Rapetti, Peter Skott, Arslan Razmi
Economics Department Working Paper Series
Recent research has found a positive relationship between real exchange rate (RER) undervaluation and economic growth. Different rationales for this association have been offered, but they all imply that the mechanisms involved should be stronger in developing countries. Rodrik (2008) explicitly analyzed and found evidence that the RER-growth relationship is more prevalent in developing countries. We show that his finding is very sensitive to the criterion used to divide the sample between developed and developing countries. We then use alternative classification criteria and empirical strategies to evaluate the existence of asymmetries between groups of countries and find that the effect …
The Real Exchange Rate And Economic Development, Arslan Razmi, Martin Rapetti, Peter Skott
The Real Exchange Rate And Economic Development, Arslan Razmi, Martin Rapetti, Peter Skott
Economics Department Working Paper Series
Recent empirical studies have found a robust correlation between competitive exchange rates and economic growth in developing economies. This paper presents (i) a formal model to help explain these findings and (ii) econometric evidence on the relation between investment and the real exchange rate. The model emphasizes the existence of (hidden) unemployment as a source of endogenous growth, even under constant returns to scale. Growth promoting policies, however, affect the external balance, and two instruments are needed in order to achieve targets for both the growth rate and the trade balance. The real exchange rate can serve as one of …
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 …
Pursuing Manufacturing-Based Export-Led Growth: Are Developing Countries Increasingly Crowding Each Other Out?, Arslan Razmi
Pursuing Manufacturing-Based Export-Led Growth: Are Developing Countries Increasingly Crowding Each Other Out?, Arslan Razmi
Economics Department Working Paper Series
This study empirically investigates the presence of crowding out effects emerging from intra- developing country competition in export markets for manufactured goods. Export equations are estimated for a panel consisting of twenty major developing country exporters of manufactures, after developing weighted price and quantity indexes based on their exports to thirteen major industrialized countries. The results indicate that in spite of an increase in the elasticity of industrialized country expenditures on imported products, crowding out effects became much more significant in the 1990s. The estimated crowding out effects vary across time periods, SITC categories, and levels of technological sophistication of …
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 …
Balance Of Payments Constrained Growth Model: The Case Of India, Arslan Razmi
Balance Of Payments Constrained Growth Model: The Case Of India, Arslan Razmi
Economics Department Working Paper Series
This study applies the Balance of Payments Constrained Growth (BPCG) model to India, a large developing country with a relatively low trade to GDP ratio. Rather than assuming similar elasticities of substitution between goods produced in different regions, the study extends the model to relax these assumptions. Johansen’s cointegration technique is employed to estimate trade parameters. Short-run adjustments are explored within a vector error correction framework. The average growth rates predicted by various forms of the BPCG hypothesis are found to be close to the actual average growth rate over the period 1950-1999, although individual decades display substantial deviations.
Developing Country Exports Of Manufactures: Moving Up The Ladder To Escape The Fallacy Of Composition?, Arslan Razmi, Robert A. Blecker
Developing Country Exports Of Manufactures: Moving Up The Ladder To Escape The Fallacy Of Composition?, Arslan Razmi, Robert A. Blecker
Economics Department Working Paper Series
This paper tests for a ‘fallacy of composition’ by analysing the demand for exports of the 18 developing countries that are most specialised in manufactures in the markets of the 10 largest industrial countries. Estimated export equations (both time-series and panel data) suggest that most developing countries compete with other developing country exporters rather than with industrialised country producers. A smaller number of countries that export more high-technology products compete with industrialised country producers and also have higher expenditure elasticities for their exports. Thus, the fallacy of composition applies mainly to the larger group of countries exporting mostly low-technology products.