Low Economic Growth Rates Research Articles

The Performance of Business and Consumer Sentiment for Early Estimates of GDP Growth: Old Turning Points and New Challenges of the Corona Crisis

This study proves the efficiency of the results of business and consumer surveys for the first early estimates of GDP growth in Russia. For the expert community, the use of this alternative information, which is not revised over time and covers major economic activities, is essential when up-to-date traditional statistical information are not available, are often revised, and published with a delay. The main hypothesis of the joint cyclical sensitivity of flash estimates of aggregate entrepreneurial behaviour and reference statistics on GDP growth is tested. For this purpose, the authors calculate the composite economic sentiment indicator (ESI), which combines 18 indicators based on the results of surveys of approximately 24,000 entrepreneurs in all main economic activities and 5,100 consumers. The empirical patterns, cyclical movement, the correspondence of turning points in GDP growth and ESI dynamics, and GDP expected estimates are identified through the joint testing of the analysed series. The authors present the results of cross-correlations, Hodrick-Prescott statistical filtering, a long-term interrelation, and a two-dimensional vector autoregression model. Statistically significant test results and the pattern of the impulse response function allow us to evaluate the quarterly nowcasts of GDP growth with the maximum predictive period of four quarters. Three scenarios of expected impulses in the dynamics of aggregate economic sentiments, different in strength and duration of their impact on further economic growth, are formed; these impulses include new crisis shocks for the Russian economy, which have been growing since March 2020. The resulting options of assessments reflect the possible amplitude of the decline in GDP growth from mid-2020, after COVID-19 containment measures and the collapse of oil prices. According to the results, the first signs of a recovery in low economic growth rates are possible only by mid-2021.

Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

Abstract This paper analyses the effects of two alternative monetary strategies (exchange rate targeting and inflation targeting) on economic growth and employment. On the panel of 18 countries for the period from 1996 to 2013, I tested the hypothesis that countries in exchange rate targeting have a higher rate of GDP growth and lower inflation rate. In order to test the impact of exchange rate policy on economic growth and prices, I applied dynamic panel two stepwise method of least squares (2SLS method) and they were evaluated by two independent regression equation. In order to allow the comparison of results related to exchange rate targeting, the effects of the introduction of inflation targeting in the unemployment rate were also estimated using the panel method two stepwise least squares (2SLS method). Results of empirical studies show that countries with inflation targeting have a lower rate of economic growth and higher unemployment.

Carbon emission performance and quota allocation in the Bohai Rim Economic Circle

As the most developed economic zone in northern China, the establishment of regional carbon emission trading (CET) market in the Bohai Rim Economic Circle (BREC) is vital to achieve the Chinese government’s carbon emissions reduction target. This study estimates the carbon emissions in the BREC from 2005 to 2017. To evaluate the impact of energy consumption structure on carbon emission performance in this region, a directional distance function is constructed, and two scenarios are assumed. Then, a two-stage allocation model is established to allocate the carbon emission quotas in 2030. The results indicate the following: (1) Carbon emission intensity tends to decrease and there are large differences among provinces. (2) Energy consumption structure has a great effect on carbon emission performance, ignoring energy consumption structure will underestimate carbon emission performance. (3) Total accumulated carbon emission targets are 85.20 billion tons, 82.36 billion tons and 79.62 billion tons at the high, medium and low economic growth rates. These results provide a reference for the regional carbon emission quotas allocation and for accelerating the establishment of a national CET market.

От подхода 2Д – к подходу 4Д

От подхода 2Д – к подходу 4Д

The impact of economic policy instruments on the conditions of sustainable economic growth

Given the low rates of economic growth in Russia and the aggravation of the geopolitical situation, the question of the prospects for its stimulation with fiscal and monetary policy tools is of particular relevance. The main priority of the economic policy is to ensure financial stability and prevent destabilization, taking into account the volatility of hydrocarbons prices and the geopolitical tensions. The article uses dialectical materialistic and concrete historical methods to protect that the current economic policies should be focused on sustainable economic growth. It is necessary to form a new strategy of monetary regulation and budget policy that would contribute to the sustainable development of the Russian economy and ensure the economic security of the country. In the perspective of maintaining sustainable economic growth, it is important to solve the problem of equitable distribution, expressed in a strong stratification of society and the violation of social stability, the implementation of economic policy at the level of macroeconomic planning; it is advisable for the Central Bank to follow the link between the possible range of inflation and economic growth; to stimulate consumer and investment demand by reducing interest rates, to form money supply not due to linking gold and foreign currency reserves, but under the issue of securities, to increase budget expenditures and increase public debt for the sake of investment in education and health care.

Strane direktne investicije kao izvor finansiranja privrednog razvoja zemalja jugoistočne Evrope

The paper analyzes the sources of Southeastern European countries' economic development financing - Albania, Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Romania, Macedonia, and Serbia in the period from year 2009 to year 2018. The research focus is on the one hand directed towards the analysis of the economic growth rate, the share of domestic savings and the current account balance. On the other hand, particular attention in the analysis is given to the data on the dynamics of foreign direct investment. The analysis in the paper indicates that due to the lack of domestic savings and difficulties with foreign borrowing, in the observed period, foreign direct investment was the most represented source of financing for economic development. The analysis for the SEE countries also shows that the lack of domestic savings caused the unfavorable structure of foreign direct investment flows with the end result of a low economic growth rate. When it comes to the relevance of foreign direct investment for the long-term economic development of Southeastern European countries, the paper concludes that a more active development policy is needed, aimed at increasing the share of domestic savings in gross domestic product as well as the growth of the domestic investment. Simply put, in present circumstances, it is unrealistic to rely heavily on foreign investments.

A study of degrowth paths based on the von Neumann equilibrium model

Abstract This paper revisits the von Neumann equilibrium model from a degrowth perspective. Degrowth can be either planned or autonomous based on voluntary simplicity (VS), characterized by voluntary constraints on the private consumptions. Any share of the working population is allowed to limit their private consumptions or ecological footprint. Degrowth means a lower economic growth rate as well as reductions in the usage of materials and fossil energy; however, when the economy cannot fit within the biophysical boundary despite such reductions, degrowth can also mean a deliberate transition towards lesser and cleaner production of a smaller number of goods. Taking ecological boundaries into consideration may thus switch the direction of an economy from growth to degrowth. Degrowth is consistent with economic equilibrium in the dynamic input-output model. Degrowth equilibrium results when a critical mass of the population prioritizes diminishing the ecological deficit over increasing the output levels. Green growth can take place during degrowth. While the economy gradually shrinks, the interest (profit) rate in macroeconomic equilibrium is negative due to the conservation target (excessive consumption has negative value to VS-type agents). Degrowing private consumptions implies less work, more leisure and better quality of the environment, improving social welfare. Degrowth can be advanced by adopting a more cooperative production system or by imposing high ecological taxes. The equilibrium model yields an argument for basic income as a means of supporting welfare during degrowth and of compensating for unpaid work. The open economy version of the model shows reduced scope for intra-industry trade between similar countries.

Inflation and economic activity in Suriname

Abctract. Maintaining a low rate of inflation and sustainable economic growth are at the core of monetary policymaking. Price stability is considered a condition for a healthy macroeconomic environment which promotes sustainable growth and a low rate of inflation is necessary to maintain stability in the financial sector as well as to boost investment activities. Motivated by the largely-discussed relationship between inflation and output, this paper examines this relationship for the economy of Suriname over the period 1975 to 2015, utilizing a vector autoregressive model and impulse response functions. The findings of the study reveal how the various sources of inflation impact on the economy of Suriname. Domestic price shocks and money-supply shocks, in particular, seem to substantially impact on economic activity. Exchange-rate shocks are detrimental to domestic prices. Based on the findings of this study, it is highly recommended for the Central Bank of Suriname to continue its prudent monetary policies in order to maintain a stable exchange rate and price stability. The study advocates for maintaining a healthy macroeconomic climate with price stability, which is a crucial condition for Suriname to follow a sustained path for economic growth and development. Keywords. Economic growth, Inflation, Time-series models. JEL. C32, E31, E47.

Regional Budgets for January-July 2019: Growth of Revenues Shifts Into Low Gear

Fast increase of regional consolidated budgets amid low economic growth rates could stay for long. And such turning points was not slow in coming: following 22.6% growth as of first four months of 2019, increase of tax and non-tax regional revenues registered in May-July came to barely 1.4% and most likely will remain low till the end of the year. Despite the shift of priorities in the state budgetary policy the structure of the regional budgets expenditures for the first 7 months of 2019 does not practically change from the corresponding period of 2017. In its turn, deceleration of regional growth rates through the year-end will exercise downward pressure on the growth of their expenditure obligations. Solid performance of the regional budgets balance facilitated further contraction of the average debt burden of RF subjects which constituted 21.5% of the regional revenues volume returning to the 2009–2012 level. Nevertheless, average and low income regions report twice as high debt burden.

Факторы обеспечения стабильности и формирование позитивного имиджа Северо-Кавказского федерального округа

The author highlights the positive and negative ele-ments (factors) in stability in the North Caucasus region. Positive drivers include de-escalation during the region’s political development, the im-provement of living standards, the implementa-tion of major investment projects, the enhance-ment of civil society institutions, and a new style of their relationship with the authorities. Negative fac-tors imply low economic growth rates, subsi-dized budgets of the constituent entities of the Russian Federation (the Republic of Ingushetia, the Republic of Dagestan, the Chechen Republic), extremist and terrorist risks and threats, a conflict-prone nature of ethnic and political processes, a high level of corruption, few social lifts that allow young people to increase social and political mobility. The study shows that anti-terrorist dialogs between the authorities and the institutions of civil society increase people’s loyalty in the polyeth-nic region and upgrade the status of the North Caucasus Federal District. Stopping the outflow of Russian people from the District and returning them to it (primarily to the eastern regions of Stavropol region) are the major strategic tasks of the government. These are the factors in stable po-litical processes and the preservation of highly qual-ified personnel in the elite formation necessary for the sustainable development of the District and the enhancement of its invest-ment attractiveness.

Income Inequality and Economics Growth: Empirical Evidence from Bangladesh

The main purpose of this work is to explore the relationship between income inequality and economic growth in Bangladesh. The study is based on time series data starting from 1973 to 2016 of Bangladesh. In this paper, we used the Augmented Dickey-Fuller (ADF) test for checking stationary of series. This study gives a hint that all the afore-mentioned series are stationary at first difference. This paper also incorporated the Johansen test for co-integration and Vector error correction model (VECM) to test the long run relationship between income inequality and economic growth rate. The results of the study indicate that economic growth and income inequality are co-integrated. This approach suggests that an inverse relationship exists between income inequality and economic growth rate. In other words, the higher economic growth rate results in lower income inequality and lower economic growth rate leads to higher income inequality. We find that income inequality plays a negative and significant role in economic growth. Keywords : Income inequality, Economic growth, ADF, Cointegration test, VECM, Bangladesh. DOI : 10.7176/JESD/10-16-09 Publication date : August 31 st 2019

The decline of the labor income share in Mexico, 1990–2015

• Mexicós labor share fell from 1990 to 2015 because of reductions in formal sectors. • Stagnant productivity in the self-employment sectors held real formal wages back. • With formal wages anchored, formal productivity gains accrued to profits. • Slow economic growth had a crucial role in the decline of the labor share. • A remaining puzzle is why a rising profit share failed to stimulate growth. The paper studies the decline of the labor income share ( LIS ) in Mexico during the period 1990–2015. The decline is mostly explained by reductions within the economy’s major sectors (including manufacturing, tradables, and non-tradables) rather than by a recomposition of value added towards sectors with low labor shares. In contrast to agriculture—where LIS fell due to a shift of labor force from self-employment to wage-employment—in other major areas of the economy the fall in LIS is explained by reductions within the wage-employment sector. Econometric estimations indicate that parallel declines in the wage share and relative productivity of non-tradables and in the US manufacturing labor share all played a large role in the reduction of the manufacturing wage share in Mexico. More generally, the analysis suggests that the lagging productivity of the economy’s informal non-tradable sector—itself a reflection of the country’s low aggregate rate of economic growth—is a crucial factor in the fall of LIS in the formal sectors. The paper concludes by discussing possible explanations for the paradox of the slow rate of economic growth in Mexico despite the rise in the profit share.

Development of the Global Market of Artificial Intelligence Systems

We conducted a research on the global market of artificial intelligence systems and technologies and its new stage of development. The relevance of this research is caused by recent economic slowdown, structural changes and imbalances of the world economy. The need for creating a new base of economic development for successful companies’ and countries’ competition in the world market sharply increased. Thus, we aimed to identify critical parameters, trends and barriers for such market’s development. Scientific interest to artificial intelligence (AI) as a subject of economic research steadily increases. At least, in the medium term, new large corporations will appear unprecedentedly quickly in those world economy industries that form consumer demand for goods and services. In certain industries, for example, in automotive ones, the use of AI is limited by natural restrictions. In some developed countries the use of AI is connected with calls for improving competitiveness of their social and economic development models and with low rates of economic growth. Development of the world market of artificial intelligence systems is at transitional stage, giving new opportunitiesfor goods production improvement and economic growth all over the world. At the same time, the accruing foreign trade protectionism breaks global chains of added value and slows down dissemination of new technologies that promotes decline in productivity. Therefore effective instruments of the international cooperation are necessary for preserving past achievements. New system of competitive advantages and place of the world economy actors in the international division of labour has to be established. Developing the market of artificial intelligence systems will inevitably lead to searching for a new paradigm of national innovative systems’ advancement. This, in turn, will promote further aggravation of the competition between countries and between the largest multinational corporations. The AI and digital technologies has become a significant factor for the world economy development in the conditions of economic growth slowdown.; However, the positive effect from their implementation remains disputable. This factor will significantly define countries’ economic policy. In Russia, developments in the field of AI are promising, but their implementation demands complex institutional conditions.

Industrial policy as a driver of economic growth: experience of European Union member states for Ukraine

The article analyzes the experience of reforming of industrial policy of the EU member states on the way to sustainable economic development. Based on the conducted analysis the priority areas of high added value in Ukraine are outlined: transport, aerospace, energy engineering, production of equipment for alternative energy, including new materials and energy storage devices; production of weapons, military and special equipment; information and communication technologies. The development of the diversified and high-tech industries, especially the processing industry, is the key to ensuring the economic growth in Ukraine. The de-industrialization in Ukraine in recent years has been slowing down the movement towards the stable and sustained growth. To estimate trends in the structure of Ukraine’s GDP and their impact on economic growth, the taxonomic indicator of development level has been calculated. The units of the statistical aggregate (data from Germany, Poland and Ukraine) were mapped. The relative position of the state was determined as the distance from the statistical aggregate unit to the selected reference base (reference point). The smaller the value of the taxonomic indicator of development is, the closer the country is to the standard. The indicators of GDP, GDP growth rate and the share of industrial production belong to stimulants; the level of inflation and the share of agriculture in GDP - to disincentives. The corresponding calculations permit to draw the following conclusions: - Poland was the closest to the standard in 2000 (index 0.650), although Ukraine demonstrated at that time the highest growth rates and the biggest share of industry in GDP; - in 2017 the gap was increasing - Ukraine was inferior to both countries (with indicators 0.325 and 0.336), due to lower rates of economic growth and a decrease in the share of industrial production against the backdrop of inflationary phenomena. Ukraine should take into account that no country focused on agricultural development has succeeded in economic development. Progressive foreign experience can highlight the criterion of positive changes - an increase in the proportion of technologically complex productions with high added value in the structure of reproduction.

Capital accumulation, economic growth and the balance-of-payments constraint: The case of Mexico, 1951-2014

After a critical assessment of both Thirlwall’s long-run growth model and Clavijo’s and Ros’s (2015) model where capital accumulation determines output growth, this paper displays an alternative model in which capital accumulation and the growth rate of capital productivity determine the long-run growth rate of output which is consistent with a constant position of the balance of payments as a percentage of GDP. Then, the latter is applied to inquire the causes accounting for Mexico’s low economic growth rate during 1982-2014. We conclude, on empirical grounds, that the sharp decline in the internal demand for domestic goods and both the rates of net capital accumulation and productivity played a major role in the slowdown of the Mexican economy. The income elasticities of the demand for exports and imports also played a role, albeit to a lesser extent.

A New Approach to Social Welfare: tax-pension combination

We view social welfare as a system that redistributes resources (i) within a generation and (ii) across generations so as to maximize social wellbeing. By setting tax and expenditure institutions properly, we implement optimal social welfare. Notable are the following implications: (i) in the presence of rising earnings inequality, redistribution within a generation is more important than that across generations. Fiscal policies in this line need to be stressed. (ii) Under low rates of population and economic growth, redistribution in the form of pensions loses its efficacy and therefore should not be encouraged for welfare reasons. This point has also been supported by pension reforms in many welfare states. Our preliminary calibration analysis confirms these conclusions numerically.

FEATURES OF FUNCTIONING NATIONAL MODEL OF RESOURCE ECONOMICS IN UKRAINE

Introduction. Almost thirty years in the modern history of Ukraine were marked by modest economic and social outcomes. Extremely low rates of economic growth, price and exchange rate instability, technological backwardness of the majority of domestic enterprises, their mass closing, degradation of production and social infrastructure, as well as human capital, low incomes of the vast majority of the population and their significant differentiation, deformations in the work of democratic mechanisms led to the need to revise the existing paradigm of socio-economic development. The purpose of the research is to study the theoretical and practical features of forming and functioning of national model of resource economics.Results. The main methodological approaches for assessing the nature and features of the functioning of the domestic economy are outlined. It is determined that Ukrainian export and GDP are highly dependent on the production and export of hard and soft resources, with the latter replacing the former. We can conclude that there is a long-term trend in the structure of commodity export to the replacement of hard resources export by the export of soft resources, and the calculated correlation coefficient is 0.95. There have been positive trends towards a gradual increase in the gross production of grain, including through the increased productivity of production and labour, which will facilitate medium-term economic growth.Conclusions. The creation of a modern model of competitive economics can help to catch up the level of social and economic development of the leading countries of the world. However, in the medium term, the reform of the national economic model with minimal transformation costs is possible only under the conditions of further development, primarily, of agrarian production, which will act as a medium-term development driver and at the same time will ensure certain macroeconomic stability.

Health Services Economy and its Impact on Economic Growth in Sudan: اقتصاديات الخدمات الصحية وأثرها على النمو الاقتصادي في السودان

This study examines the impact of health service economics in relation to economic growth in Sudan. It explains the concept of health service economics, and the demand for the good performance of health services, as a factor effecting economic growth rates. The study also details the development of the health sector in Sudan, focusing on the role of medical staff working in the health field. The study also discusses health facilities in Sudan, describing how their development aligns with population growth, improved GDP, and the overall growth rate of the economy, in addition to per capita GDP. The study identifies a shortfall in the provision of health services in Sudan, due to the migration of medical personnel, as well as inadequacies in terms of the number of health facilities available. It notes that these insufficiencies influence the delivery of health care services to the population, leading to low economic growth rates resulting from restricted productivity. In conclusion, the study recommends the allocation of higher budgets to the health sector to improve health facilities and boost medical staff numbers, on the premise that the development of the health sector will support economic development overall.

Political instability and economic growth in Africa

Political instability, especially when it is of a violent nature, diminishes the productive, as well as the transactional capacities of the economy. This has adverse consequences for investment and thus future economic growth, a situation which in turn creates a fragile socio-political environment. The relationship between political instability and economic growth flows in either direction; political instability resulting in low economic growth (PI → LEG) and low economic growth resulting in political instability (LEG → PI). From the PI → LEG point of view, political instability influences the latter through a number of channels including the tax system, government spending and fiscal deficit, and inflation, all of which affect the level of investment, and thus influence future economic growth rates. From the LEG → PI point of view, low economic growth rates create conditions favourable for political instability. Reviewing economic and political stability data from 52 African countries for the period 1980 to 2013, the analysis demonstrates through some scenarios that higher and relatively more stable long-term (1980–2013) average growth rates correlate with lower levels of political instability in most of the pairwise comparisons of the countries. This is shown to be especially true for less resource-dependent countries. Empirical analyses of the data comprising all the countries under investigation find there to be a strong bi-directional direct relationship between political stability and the level of growth, and it is even more so the case for conflict-affected countries, unlike the non-conflict-affected countries. Further analyses using three-year averages of the data from 1981 to 2013 find that greater fluctuations in the growth rate adversely affect the level of political stability in especially conflict-affected countries, thus indicating a correlation between economic instability and political instability.

Factors hindering economic development: evidence from the MENA countries

PurposeDespite the possession of considerable natural, financial and human resources, the Middle East and North Africa (MENA) region suffers low economic growth rates, high unemployment rates, high poverty rates and high illiteracy rates. The purpose of this paper is to find out the factors that hinder the development of economic activities in this region.Design/methodology/approachThis study uses co-integration analysis and vector error correction model on a sample of 18 MENA countries, covering the period 2002–2016. It exploits gross domestic product (GDP) as a dependent variable, and public debt, trade balance, natural resources rents, importation of high technology, labour participation rate, military spending, population size, political instability and corruption as independent variables.FindingsThe paper finds that public borrowing, trade deficit, military expenditures, the low level of technological innovation, population, political turbulences and corruption, all hinder GDP in the long-run. Additionally, public debt, military spending and political instability obstruct GDP in the short run. The results also suggest the existence of Dutch diseases in both the short- and the long-run. On the other hand, labour market conditions do not seem to have any effect on the economic performance of the MENA countries.Originality/valueIn addition of examining an understudied sample of countries, this paper – unlike other studies on the MENA region that look at factors that boost economic growth – exploits factors that have possible negative impact on the economic situation of the region.