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Article
Publication date: 1 April 2001

Magda Kandil

Provides an evaluation of the reality of the German economy after unification, also answers to some of the questions that the post‐unification era has raised, analyzes…

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Abstract

Provides an evaluation of the reality of the German economy after unification, also answers to some of the questions that the post‐unification era has raised, analyzes aggregate and sectoral data of the former GDR and the Federal Republic of Germany over the period 1970‐1989. The results characterize the former GDR with a steeper supply curve. While the central plan assumed a steady growth of real output over time, it eliminated producers’ incentives to vary capacity utilization in response to demand pressures. Demand pressures proved inflationary without determining conditions in the labor market. In contrast, the market‐oriented plan in West Germany tied output expansion and contraction with demand fluctuations. Consequently, inflationary effects of demand fluctuations appeared moderate in West Germany and real output growth was not sustained at a high level over time. Demand fluctuations determined employment changes in West Germany. Implications of these differences are analyzed in light of the reality of the post‐unification in Germany.

Details

International Journal of Social Economics, vol. 28 no. 3
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 1 November 2006

Magda Kandil

Using quarterly data for a sample of 17 industrial countries, the purpose of this paper is to study asymmetry in the face of monetary shocks compared to government spending shocks.

3884

Abstract

Purpose

Using quarterly data for a sample of 17 industrial countries, the purpose of this paper is to study asymmetry in the face of monetary shocks compared to government spending shocks.

Design/methodology/approach

The paper outlines demand and supply channels determining the asymmetric effects of monetary and fiscal policies. The time‐series model is presented and an analysis of the difference in the asymmetric effects of monetary and fiscal shocks within countries is presented. There then follows an investigation of the relevance of demand and supply conditions to the asymmetric effects of monetary and fiscal shocks. The implications of asymmetry are contrasted across countries.

Findings

Fluctuations in real output growth, price inflation, wage inflation, and real wage growth vary with respect to anticipated and unanticipated shifts to the money supply, government spending, and the energy price. The asymmetric flexibility of prices appears a major factor in differentiating the expansionary and contractionary effects of fiscal and monetary shocks. Higher price inflation, relative to deflation, exacerbates output contraction, relative to expansion, in the face of monetary shocks. In contrast, larger price deflation, relative to inflation, moderates output contraction, relative to expansion in the face of government spending shocks. The growth of output and the real wage decreases, on average, in the face of monetary variability in many countries. Moreover, the growth of real output and the real wage increases, on average, in the face of government spending variability in many countries. Asymmetry differentiates the effects of monetary and government spending shocks within and across countries. The degree and direction of asymmetry provide a new dimension to differentiate between monetary and fiscal tools in the design of stabilization policies.

Originality/value

The paper's evidence sheds light on the validity of theoretical models explaining asymmetry in the effects of demand‐side stabilization policies. Moreover, the evidence should alert policy makers to the need to relax structural and institutional constraints to maximize the benefits of stabilization policies and minimize the adverse effects on economic variables.

Details

Journal of Economic Studies, vol. 33 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 1 November 2011

Michael Binder and Susanne Bröck

This chapter advances a panel vector autoregressive/vector error correction model (PVAR/PVECM) framework for purposes of examining the sources and determinants of…

Abstract

This chapter advances a panel vector autoregressive/vector error correction model (PVAR/PVECM) framework for purposes of examining the sources and determinants of cross-country variations in macroeconomic performance using large cross-country data sets. Besides capturing the simultaneity of the potential determinants of cross-country variations in macroeconomic performance and carefully separating short- from long-run dynamics, the PVAR/PVECM framework advanced allows to capture a variety of other features typically present in cross-country macroeconomic data, including model heterogeneity and cross-sectional dependence. We use the PVAR/PVECM framework we advance to reexamine the dynamic interrelation between investment in physical capital and output growth. The empirical findings for an unbalanced panel of 90 countries over the time period from at most 1950 to 2000 suggest for most regions of the world surprisingly strong support for a long-run relationship between output and investment in physical capital that is in line with neoclassical growth theory. At the same time, the notion that there would be even a long-run (let alone short-run) causal relation between investment in physical capital and output (or vice versa) is strongly refuted. However, the size of the feedback from output growth to investment growth is estimated to strongly dominate the size of the feedback from investment growth to output growth.

Details

Economic Growth and Development
Type: Book
ISBN: 978-1-78052-397-2

Keywords

Article
Publication date: 22 March 2022

Thi Bich Thuy Dao and Vi Dung Ngo

This study focuses on the relationship between foreign direct investment (FDI) and economic growth of the formal sector comprising all foreign and domestic registered…

Abstract

Purpose

This study focuses on the relationship between foreign direct investment (FDI) and economic growth of the formal sector comprising all foreign and domestic registered enterprises engaged in production of goods and services.

Design/methodology/approach

This study uses a balanced longitudinal data set for the period from 2006 to 2014 from secondary sources in 63 provinces/cities of Vietnam. The generalized method of moments (GMM) estimation for a dynamic panel data model is applied.

Findings

The greater the share of FDI in capital resource, the more favorable the output growth in the whole formal sector. The FDI enterprises are more productive than domestic formal firms, and the output growth of FDI firms creates a positive spillover effect on the output growth of domestic firms.

Originality/value

The effect of FDI on economic growth is investigated at subnational level for the whole formal economic sector as well as the formal domestic firms. The domestic and foreign industrial agglomerations and the business environment are also examined.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 6 May 2014

Ahmad Zubaidi Baharumshah and Siew-Voon Soon

– The purpose of this paper is to examine the causal relationships between inflation, output growth and their uncertainties in Malaysia.

3344

Abstract

Purpose

The purpose of this paper is to examine the causal relationships between inflation, output growth and their uncertainties in Malaysia.

Design/methodology/approach

The modeling approach allows for structural breaks to avoid the masking of specific impacts.

Findings

Based on the asymmetric Generalized Autoregressive Conditional Heteroskedasticity model, the paper found strong evidence favoring a positive effect of a change in the inflation uncertainty as predicted by the Friedman-Ball hypothesis. In addition, inflation (inflation uncertainty) has direct (indirect) negative effect on the output growth. The results are consistent with the Taylor effect – increases in inflation uncertainty decreases output uncertainty. The analysis also reveals that economic uncertainty lowers the growth rate of output, complying with Bernanke's idea.

Originality/value

The present study suggests that extra efforts are required to locate the breaks in the variance in order to draw concrete evidence on link between economic uncertainty and macroeconomic performance.

Details

Journal of Economic Studies, vol. 41 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 21 March 2019

Abdullahil Mamun, Harun BAL and Emrah Eray AKCA

The study aims to examine the export-led growth (ELG) hypothesis for Bangladesh. The direction of causality between export and output largely determines the success of…

Abstract

Purpose

The study aims to examine the export-led growth (ELG) hypothesis for Bangladesh. The direction of causality between export and output largely determines the success of export-oriented trade policies. A unidirectional causality running from export to output growth is required according to the narrow definition, while bidirectional causality is allowed for the broader definition. The study offers the causality inference, both from narrow and broader senses.

Design/methodology/approach

The study uses the bootstrap version of Toda and Yamamoto-modified causality tests, a recent development in time series econometrics, robust against the regularity conditions such as stationarity, properties of integration and cointegration and constancy of parameters. It uses monthly secondary data for the period of 1990-2014.

Findings

Test results suggest a unidirectional positive causal relationship from exports to output growth, meaning that the policies and strategies supporting exports are promoting output growth and thereby approve the ELG hypothesis for Bangladesh from the narrow sense. However, the absence of bidirectional causality between export and output growth, necessary to support the ELG hypothesis from the broader perspective, discards the conjecture that output growth is reinvigorated through the probable second-round effects of ELG produced from output growth to exports.

Practical implications

Lower investments in infrastructure, technology and education are reasons for the absence of ELG from the broader sense. Therefore, directing returns generated from exports for the development of technology, infrastructure and human capital, with regular and continuous revision of trade-liberalization policies so as to make its exports more competitive in the world market, will help Bangladesh trigger the second-round effect of ELG produced from output growth to exports.

Originality/value

Beyond the conventional approaches, this is the first contemporary time series econometrics causality analysis between export and output growth of Bangladesh, both from narrow and broader senses.

Details

Journal of Asia Business Studies, vol. 13 no. 2
Type: Research Article
ISSN: 1558-7894

Keywords

Article
Publication date: 10 October 2008

Magda Kandil and Nazire Nergiz Dincer

The paper aims to examine the effects of exchange rate fluctuations on real output, the price level, and the real value of components of aggregate demand in Egypt and Turkey.

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Abstract

Purpose

The paper aims to examine the effects of exchange rate fluctuations on real output, the price level, and the real value of components of aggregate demand in Egypt and Turkey.

Design/methodology/approach

Building on a theoretical model that decomposes movements in the exchange rate into anticipated and unanticipated components, the empirical investigation traces the effects through demand and supply channels.

Findings

In Turkey, anticipated exchange rate appreciation has significant adverse effects, contracting the growth of real output and the demand for investment and exports, while raising price inflation. Random fluctuations in Turkey have asymmetric effects that highlight the importance of unanticipated depreciation in shrinking output growth and the growth of private consumption and investment, despite an increase in export growth. In Egypt, anticipated exchange rate appreciation decreases export growth. Given asymmetry, the net effect of unanticipated exchange rate fluctuations, in Egypt, decreases real output and consumption growth and increases export growth, on average, over time.

Research limitations/implications

In light of the country‐specific evidence, future research should extend the investigation using panel estimation, incorporating various demand and supply shocks along with exchange rate fluctuations, to establish the relative importance of various shocks on macroeconomic performance across MENA countries.

Practical implications

While adhering to a flexible exchange rate policy to boost competitiveness, managing fundamentals to reduce excessive volatility impinging on the economic system over time should top the policy agenda.

Originality/value

Excessive volatility in the real effective exchange rate could be detrimental to real growth, over time, as the evidence for Turkey and Egypt illustrates.

Details

International Journal of Development Issues, vol. 7 no. 2
Type: Research Article
ISSN: 1446-8956

Keywords

Article
Publication date: 8 July 2014

Adian A. McFarlane, Anupam Das and Murshed Chowdhury

– The purpose of this paper is to examine the relationship among employment, real wage, and output growth in Canada.

Abstract

Purpose

The purpose of this paper is to examine the relationship among employment, real wage, and output growth in Canada.

Design/methodology/approach

Using quarterly data from 1994q2 to 2012q3, this paper employs a vector autoregressive framework while allowing for the derivation of output from its historical maximum over the sample period to affect future output, employment, and real wage growth dynamics.

Findings

There are three main findings: output growth is significant in predicting employment growth and vice versa; real wage growth neither Granger causes employment growth nor output growth, but employment growth Granger causes real wage growth; and non-linear dynamics, captured by the current depth regression (CDR) effect term, through the sign as well as the magnitude of output changes, are important in characterizing the evolution of the relationship among output, employment, and real wage growth.

Practical implications

The findings of this research have significant implications for policy makers. Output and employment growth are important in forecasting each other in Canada. In contrast to the mainstream theory, real growth is insignificant in explaining the future dynamics of employment in Canada. Policies need to be formulated to encourage the growth of employment to ensure sustain output growth.

Originality/value

This study examines empirically the real output, real wage, and employment link in Canada. This study uses the most recently revised GDP data arising from the 2012 Historical Revision of the Canadian System of National Accounts. The econometric methodology involves the standard vector autoregression (VAR) model to which the authors introduce non-linear dynamics through a term that controls for the deviation of output from its preceding historical maximum: the CDR effect.

Details

Journal of Economic Studies, vol. 41 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 13 May 2019

Rosaria Rita Canale and Rajmund Mirdala

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II…

Abstract

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

Details

Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
Type: Book
ISBN: 978-1-78743-793-7

Keywords

Abstract

Details

Explaining Growth in the Middle East
Type: Book
ISBN: 978-0-44452-240-5

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