Periods Of Low Economic Growth Research Articles

Economic activity and the bank credit channel

We study empirically the effect of growth in real economic activity on the strength of the bank credit channel of monetary policy in the United States using quarterly commercial bank-level panel data between 1986 and 2018, and bank-firm matched administrative data on loan volumes and terms between 2012 and 2018. We find that monetary policy is significantly more effective through the bank credit channel in spurring activity during periods of low economic growth than in cooling the economy when growth is high. Our results also suggest that the channel operates through a broader range of loan categories and banks than previously documented, that it is stronger for business than household lending, and that for some of the major loan categories it only operates in a low economic growth environment.

Solving Pakistan’s Poverty Puzzle: Whom Should We Believe? What Should We Do? (The Omer Asghar Khan Memorial Lecture)

Understanding Pakistan’s economic performance has never been easy. Its capacity to generate impressive rates of economic growth in the 1960s and 1980s with low levels of savings, investment and very poor human development indicators confounded its critics. Indeed during the overall period 1960-1990 Pakistan’s growth performance would place it in the top ten countries in the world. This made an eminent economist Professor Richard Eckaus remark, “Pakistan is a puzzle, a miracle of levitation. With one of the lowest domestic savings rate in Asia, its economy has performed quite creditably. Since we do not believe in miracles, we have to wonder whether the capital inflows that have sustained this growth will last”.1 Unfortunately they did not. Pakistan’s growth rate in the 1990s came tumbling down, the result of a number of factors of which a decline in capital inflows also played a significant part. If Pakistan’s growth performance has been in part difficult to justify then understanding or explaining changes and wide fluctuations in its poverty levels has posed even a more challenging task. Pakistan has witnessed over the last three decades periods of high economic growth, as in the 1960s, accompanied with increasing poverty levels, periods of low economic growth, as in the 1970s, accompanied by reductions in poverty levels, periods of high economic growth leading to a decline in poverty as in the 1980s and periods of low economic growth as in the 1990s accompanied by as we shall see by increasing poverty levels.

Renewable energy and economic growth: A Markov-switching approach

This paper examines the dynamic causal relationship between renewable energy prices and economic growth in the cases of Norway, New Zealand, and two Canadian provinces. A Markov-switching vector autoregression (MS-VAR) model is used with model parameters being governed by a hidden Markov chain, allowing the causal relationship to vary amongst different states of the economy. A unidirectional causal link, running from economic growth to renewable energy is found in the case of New Zealand, Alberta, and Ontario. The causality emerges in the cases of New Zealand and Ontario, during periods of high economic growth, whilst it materializes in the cases of Alberta during periods of low economic growth. Our empirical results document the existence of a time-dependent causal relationship between renewable-energy prices and economic growth.

Are the actual and intended sources of financial knowledge the same? Evidence from Japan

The recent prolonged period of low economic growth and low interest rates in Japan demands that Japanese households invest in risky assets to accumulate sufficient retirement savings. In so doing, they acquire financial knowledge on these risky assets, typically from financial experts or salespersons in financial institutions. However, they may not necessarily be content with their current sources of financial knowledge because depending on their stage in the life cycle, they require different types of financial knowledge, usually from a variety of sources. Unfortunately, because of limitations in the data available, few studies have investigated whether the actual and intended sources of financial knowledge are the same. To address this research gap, this paper uses a Japanese household survey from 2010 to 2017, which provides unique information on the actual and intended sources of financial knowledge, and obtains two interesting results. First, a household’s actual sources of financial knowledge typically differ from its intended sources. More specifically, 33 % of households choosing financial institutions and experts and 52 % of households choosing financial institutions as their actual sources have a different intended source. Second, the discrepancy between actual and intended sources appears to relate to household demographic characteristics. Among those households choosing financial institutions and experts as their actual source of financial knowledge, 14 % choosing financial institutions as their intended source tend to have a lower level of financial knowledge and educational attainment. These results suggest that they have some difficulty understanding the advice of financial advisers. Among households choosing financial institutions as their actual source of financial knowledge, 26 % choosing financial institutions and experts as their intended source tend to have a larger amount of financial assets, better financial knowledge, and a preference for investing in risky assets; however, they also tend to be younger. This suggests they might want to obtain financial knowledge from financial experts to purchase risky financial assets as they age. While the study does not provide any causal evidence, the results suggest that understanding the reasons for any discrepancy in the actual and intended sources of financial knowledge may help financial institutions provide better services to these customers.

The Links Between Fiscal Federalism, Political Alignment and Elections

Does economic dependence of small towns on federal grants lead to electoral support? To answer this question, we use an exogenous rule of distribution to estimate the effects of the main federal transfer to Brazilian small towns on the results of elections throughout 20 years, when two rival parties succeeded in power. We find that more dependence on unconditional grants benefits the central government party, whereas the main opposition party loses votes in races to president and National Congress. The hypothesis is that enforcing economic dependence of small towns on the central government's unconditional grants can be a channel of political alignment - they need federal deputies aligned to the federal government to ask for budget amendments. On the other hand, larger cities can be a resilient place of opposition, once the size of government is smaller and where average income fluctuates more, especially in periods of low economic growth.

How Does the Strength of Monetary Policy Transmission Depend on Real Economic Activity?

We study the relationship between the strength of the bank credit channel (BCC) of monetary policy and real GDP growth in the United States using quarterly commercial bank level data between 1986 and 2008. We find that the BCC was significantly stronger during periods of low economic growth. Monetary policy is more effective through this channel in spurring economic activity during periods of low growth, rather than in cooling the economy when growth is high. Furthermore, we find that the BCC operated through a broader range of loan categories and banks than previously documented, underscoring this channel’s economic relevance.

The dynamic effects of fiscal consolidation episodes on income inequality: evidence for 17 OECD countries over 1978\u20132013

Using an annual data set covering 17 OECD countries over the time period 1978–2013, this paper analyzes the dynamic effects of fiscal consolidation episodes on income inequality in the short- and medium-run. By estimating impulse response functions from local projections, we find that fiscal consolidations typically lead to an increase in income inequality. Baseline results suggest that in the aftermath of the start of a fiscal adjustment episode, the Gini coefficient of disposable income increases by about 0.4% points in the short-run (in year three), and by 0.6% points in the medium-run (in year seven). The impact of fiscal austerity measures on the income distribution is found to be more pronounced (a) when the size of the fiscal consolidation package is large rather than small; (b) when the duration of the adjustment is long instead of short; (c) when the fiscal consolidation is based more on spending cuts than on tax increases; (d) when the consolidation is started in the aftermath of a financial crisis rather than in a non-crisis episode; and (e) when the adjustment falls into a period of low economic growth instead of high growth.

Investigating a new wealth tax in South Africa: Lessons from international experience

In recent years, there has been an increasing focus on new sources of taxation, including wealth tax. In South Africa, two phenomena have driven the focus on wealth tax. Firstly, the need for additional tax revenue to fund an ongoing and growing budget deficit, exacerbated by a prolonged period of low economic growth, rising government debt and a very small base of individual taxpayers. Secondly, the fact that South Africa has one of the most unequal societies in the world. The dual demands of increased tax revenue and economic inequality have converged around wealth tax as a possible panacea to both problems. Although South Africa has a long history of wealth transfer tax in the form of estate duty and donations tax, there has never been a tax on the net wealth holdings of individuals during their lifetime. Internationally, numerous countries have used wealth tax in various forms, including inheritance tax, gift tax, recurrent wealth tax and non-recurrent wealth tax. This study examines some of the international experiences with these three categories of wealth tax, seeking lessons and experiences that can inform the debate around the viability of a new wealth tax in South Africa.

: (Employment Policies in Low Growth Period: Case Studies and Empirical Analyses on European Countries)

Korean Abstract: 현재 한국이 직면하고 있는 고용률 제고의 문제는 1990~2000년대 유럽 국가들이 직면한 문제와 유사한 측면을 갖고 있다. 유럽 각국은 고속성장을 기대할 수 없는 상황에서 실업률 감소 및 고용률 제고를 위해 장기실업을 억제하고자 다양한 정책을 실시한 바 있다. 그리고 이러한 노력은 고용정책의 성과에 대한 엇갈린 의견에도 불구하고 EU의 평균 고용률이 69%로 한국보다 높은 수준이며, 일부 국가의 경우 고용개혁과 정책추진을 통해 고용률을 대폭 높이는 데 성공하기도 했다. 본 보고서는 유럽 주요국의 고용정책 방향과 내용을 분석하고, 고용유지 및 창출에 초점을 둔 지원정책을 연구함으로써 청년, 여성 및 고령층의 국내 고용률 제고정책 강화에 기여하는 데 목적을 두고 있다. English Abstract: This report suggests policy implications to enhance employment of youth, women and the elderly by researching and analysing the European Union (EU) and its member countries' employment related policies. Currently, Korea is facing problems with employment, as the European countries did during the 1990s and 2000s. In response to the situation, the European countries enforced various policies to reduce unemployment and to increase employment rate. At present, the employment rate of the EU is at around 69%, which is higher level than that of Korea. By implementing labour reforms and policies, several European countries have been successful in improving their employment rates beyond initial expectations. The unemployment rate in Korea is 3.7%, which is the second lowest amongst the OECD member countries after Norway. It is also lower than the half level of the OECD’s average unemployment rate. On the other hand, employment rate in Korea is approximately 65.3%, which is slightly lower than the OECD average, and compared to those of developed countries the gap becomes even wider. Another issue is to improve employment rate of the vulnerable groups, such as youth, women, and the elderly. Accordingly, the Korean government is planning to boost employment rate to 70% by 2017 through the Roadmap for 70% Employment Rate, 2014-2017 and the Three year Economic Reform Plan. In a related move, the Korean government aims to increase the number of jobs by 2.4 million through part time work, or so called flexible employment. To this end, the government is planning to create approximately 930,000 part time jobs. Moreover, the Korean government is emphasising work life balance through child care leave and increased child care services, while improving the employment level of women by expanding social awareness on gender equality. Then, what features do the EU's strategies and policies have to lift employment rate, particularly considering youth, women and the elderly? The deepening of the EU integration has enhanced the role of the EU. In this sense, EU's policies and strategies for employment became an important guideline to project the future direction of the EU member countries' policies. Based on research and interviews with the experts, the key features of employment in the EU are Active Labour Market Policy (ALMP), Vocational Education and Training (VET), and Apprenticeship. First of all, ALMP is an important method with respect to reducing the burden of employers and employees during the period of low economic growth. At the same time, it encourages the unemployed to return to the labour market as soon as possible. In particular, social policies and employment policies are implemented complementarily. Services related to job offering, such as EURES, have been strengthened so that the EU could minimize the job mismatch between the jobseekers and the employers. VET is one of the key policy areas that the EU is focusing on to improve the employment conditions of the disadvantaged groups. However, we can further improve youth employment by implementing VET and Apprenticeship simultaneously. Moreover, it is important for the employers to show willingness to educate the employees. The possibility of an employee changing jobs within the same field would hamper the investment in apprenticeship by the employers, even though the effectiveness of apprenticeship has been fully recognised. Finally, in order to improve employment of the disadvantaged groups, social understanding should be made that a simple employment policy cannot act alone.

Турция в свете двойных парламентских выборов 2015 года

The article investigates the main achievements and failures in Turkey’s economic and social development during the period of the Justice and Development Party (JDP) in power (since 2002). The major successes of the JDP government are related to attainment of financial and economic stability, which created a base for sustainable economic growth with the help of the increasing inflow of foreign direct investments. At the same time, the social policy of the state has become more active, including noticeable achievements in solving the housing problem. Certain positive developments were attained in the democratization process, particularly in expanding civilian control over the military elites and reducing the likelihood of military involvement in domestic political processes, as well as in terms of ethnic minorities rights recognition (primarily of Kurds). As for negative trends during the JDP period, they refer to the so called majoritarian understanding of democracy with an inevitable emergence of new social strata excluded from the official system of interest groups. This has ultimately led to the restriction of identification possibilities for secular segments of the population, who share classical values of Turkish republicanism and secularism. Such understanding of democracy has inavoidably resulted in establishing of control over media, restrictions on the freedom of speech, growth of intolerance towards the opposition, politicization of the judicial system, etc. The article also discusses tactical moves, to which the JDP elite and the President of Turkey R.T. Erdogan (who has close ties with the ruling party) have resorted in order to ensure the party's victory in the early parliamentary elections of November 2015. They took place once, prior to the June elections where JDP failed to win the majority required for forming a single-party government. Essentially, a hostage to the JDP's victory was the Kurdish problem, on which JDP had to radicalize its positions in order to get back the voices of nationalist-minded voters and, at the same time, to reduce popularity of the Pro-Kurdish Peoples' Democratic Party – another competitor for electorate. But, as a result, the split between political groups in the country over disagreements on the question of democratic freedoms was supplemented by the rift between national groups. The economic situation in Turkey is also not stable enough, because its economic prosperity relied heavily on active use of external financing. The decrease in its availability due to changes in the international financial market actualizes the threat of falling into a so called middle income trap with long period of low economic growth. Therefore, although JDP had managed to re-obtain the status of a ruling party, the price of victory is high: the country and its government will have to face a number of challenges and serious problems in the economy, internal and foreign policy. The lack of capability to find a constructive response to them can lead to radicalization in the nature of political power in Turkey.

Energy development potential: An analysis of Brazil

Abstract This paper develops an indicator for the energy development potential (EDP) of 27 Brazilian states. This indicator uses data on a state's infrastructure and its supply of and demand for energy. The indicator measures the data for three periods: the first part of the 1990s, which is a period of low economic growth; the first part of the 2000s, which is a period of high economic growth but with a historical crisis in the Brazilian energy sector; and 2009–2011, which is a period of economic growth after the energy crisis. Using a factor analysis, we are able to identify three factors for EDP. They are the demand for energy, the supply of renewable energy, and the supply of nonrenewable energy. We use these factors to classify the Brazilian states according to their EDP and to perform an exploratory spatial data analysis (ESDA) by using the Moran indicators and the local indicators of spatial association (LISA).

A cultural approach to recovery assistance following urban disasters

Using the Kobe earthquake of 1995 and the Mid-Java earthquake of 2006 as case studies, this paper discusses the process of providing cultural recovery assistance; it also analyses the term ‘civil society’, a term that reflects efforts to make assistance activities sustainable. The Kobe earthquake should be seen as a point of departure for citizen activism by volunteers; because of it, cultural recovery support was vigorously provided. Since people influenced by those support efforts later became involved in providing Mid-Java earthquake recovery assistance, both earthquake recovery support initiatives can be seen as part of an ongoing chain of events. In analysing the Kobe earthquake, it becomes clear that while there are many semantic meanings for and usages of the term ‘civil society’, it was incorporated into policy guidelines for recovery during a period of low economic growth, and a new civil society was envisioned in this period of social transformation. Organisations participating in assistance efforts following the Mid-Java earthquake sought to make ‘civil society’ a reality; this continued after the earthquake recovery was complete, and it comprised an attempt to build the connections within a civil society by looking to overcome many persistent social problems. The power of communication that ‘culture’ holds plays a large role in this.

Explaining welfare recidivism: what role do unemployment and initial spells have?

The question of high welfare re-entry rates has attracted great attention from economists and policymakers. Using a very rich administrative data set for the minimum income program of the Madrid Government (over 50,000 spells), this paper aims to broach various questions arising from the issue of welfare re-entry. We try to identify what factors determine observed differences in the durations of the first off-welfare spell. We analyze the combined effects of the length and type of exit of the first spell, unemployment, and sociodemographic characteristics. The experience of the first spell and, to a lesser extent, employability can contribute toward lengthening the time spent outside the program. Our results also show that off-welfare spells of households leaving the program in periods of low economic growth will be longer than those that do so during economic expansions. With the exception of unemployment effects, our estimates yield very similar results to those obtained in the U.S. studies, suggesting that U.S. welfare policies and analyses are not entirely irrelevant for European discussions of welfare policies.

Testing Forecast Optimality Under Unknown Loss

Empirical tests of forecast optimality have traditionally been conducted under the assumption of mean squared error loss or some other known loss function. In this article we establish new testable properties that hold when the forecaster's loss function is unknown but testable restrictions can be imposed on the data-generating process, trading off conditions on the data-generating process against conditions on the loss function. We propose flexible estimation of the forecaster's loss function in situations where the loss depends not only on the forecast error, but also on other state variables, such as the level of the target variable. We apply our results to the problem of evaluating the Federal Reserve's forecasts of output growth. Forecast optimality is rejected if the Fed's loss depends only on the forecast error. However, the empirical findings are consistent with forecast optimality provided that overpredictions of output growth are costlier to the Fed than underpredictions, particularly during periods of low economic growth.

Macroeconomic Determinants of Remittances: Evidence From India

Remittances to India have been growing rapidly since 1991, making it one of the largest recipients of remittances. This paper analyzes the determinants of remittances to India and finds that their growth over time can be explained by the increase in migration and total earnings of the migrants. Remittances are also affected by the economic environment in source countries, and appear to be countercyclical-that is, higher during periods of low economic growth in India. None of the remaining economic or political variables considered in the paper, including political uncertainty, interest rates, or exchange rate depreciation, are found to affect remittances significantly.

Macroeconomic Determinants of Remittances: Evidence from India

Remittances to India have been growing rapidly since 1991, making it one of the largest recipients of remittances. This paper analyzes the determinants of remittances to India and finds that their growth over time can be explained by the increase in migration and total earnings of the migrants. Remittances are also affected by the economic environment in source countries, and appear to be countercyclicalthat is, higher during periods of low economic growth in India. None of the remaining economic or political variables considered in the paper, including political uncertainty, interest rates, or exchange rate depreciation, are found to affect remittances significantly.

Population and economic development

The traditional view has been that population growth has adverse effects on real per capita incomes. China's restrictive population policy appears to have been based on the traditional view. There is substantial evidence that contradicts the conclusion that population growth is adverse to economic growth. Most empirical analyses of the relationship between population and economic growth do not find that there is an adverse effect. The history of the world has been that periods of low population growth have been periods of low economic growth and that high rates of economic growth have occurred when population growth is also high. Most of human history has had low population and low economic growth. Only recently has there been both rapid population and economic growth.

Occupational and Industry Forecasts of Employment: Implications for Maori

The period of low economic growth from the mid 1980s to early 1990s has impacted particularly severely on Maori. In June 1994 the unemployment rate for Maori was 19.8 per cent as opposed to 7.1 per cent for non-Maori. Maori tend to be over-represented in manual occupations and in a number of industries particularly affected by economic restructuring. As part of a wider programme assessing Maori development, educational and training options Te Puni Kokiri commissioned Business and Economic Research Ltd (BERL) to produce a set of occupational and industry forecasts of employment in New Zealand for the year 2000. 1991 Census material was used to provide a detailed 25 occupation by 21 industry analysis of employment differentiated by sex and ethnicity, which was used as a base for projections. The forecasts to the year 2000 have been generated through the linked usage of a medium term three sector model of the economy, which produces macro-economic trend forecasts, and a 21 sector version of the BERL general equilibrium model. The general equilibrium model has been extended to include 25 occupational categories and a vector of occupational substitution elasticities. The forecasts suggest that the predominant areas of employment growth will be in non-manual activities and in distribution and service industries.

Significance and Issues in the Study of Indigenous Industry

A large number of studies and researches on“Indigenous Industry”have already been done in Japan, using different approaches to various subject issues. At this point in time when almost two decades have past since the end of the postwar rapid economic growth period, it has become possible for us to objectively evaluate the content of structural change which took place in an indigenous industry during that period.This paper aims at the review of academic achievements made so far in this area of concern so as to identify still remaining issues and problems and to suggest an alternative framework of study to respond to the above-identified issues and problems.“Indigenous Industry”was generally seen as synonymous with traditional industry. In the 1970's, however, the concept of an indigenous industry was newly introduced to understand the changes in its structures during the postwar rapid economic growth period and the accompanying issues and problems in the period of low economic growth after the 60's. With the emergence of“Regionalism”, the study of indigenous industry gained further momentum when its dynamic role was emphasized as a main factor in regional economic development or growth.In the studies of position and its change in indigenous industry, the main focus was given to the aspects of environmental changes and their resultant effects on structural changes of indigenous industries, particularly in the post high-growth period. The three dimensions of analysis adopted in these studies were the demand-and-supply structures of the products of indigenous industries concerned, and the international relationships in the said context. These studies, however, seem unsuccessful in that the conclusions given still remain in the range of hypothesis mainly because of the correlation among the said three dimensions being left obscure.In the studies of the development base of indigenous industry, it was attested that among the most salient factors in the development base are production and marketing structures based on social division. Those structures, however, are very much diversified. Hence, they must be categorized in accordance with such criteria as location, history, and industrial system so as to give account to positions and characteristics of respective industries within this framework. In my view, categorization based on the pattern of development process of indigenous industries would bear more meaningful significance, for it would help us better recognize the direction of industrial development. The studies conducted in this suggested line have been very few so far.One of the most fundamental and challenging works for us, is to specifically clarify the interrelationship and/or relevance between indigenous industries and local characteristics of the industry's area. The“Regional Approach”has arisen, along with the growth of interest in dynamic role of indigenous industries in regional economy and society, and the studies in this line have been more actively pursued. The issues focused on in this approach, however, have differed from one another according to academic stance. For example, Geographers utilized this approach mainly for the study of industrial communities, while, Regionalists more positively estimated and emphasized the important role of indigenous industries in regional development.Studies on the problems, visions, and promotion policies of Indigenous Industries have so far been done more in the field of Economics rather than in Geography. Most of those studies commonly regarded as problems the issues of changes in environmental factors in which indigenous industries operated, responses to those changes from the industries, and resultant contradictions in the interaction process. Hence, those issues must further be examined based on the unique, specific characteristics of indigenous industries.

Full Employment: An Outmoded Objective in a Technological Age—Rejoinder

This paper challenges the assumption that technological change is beneficial because it results in efficient resource allocation. The introduction of technology in a period of low economic growth will merely distribute income to a decreasing number of people in jobs. As recent history has shown, this situation is worsened if the employed are not prepared to share their gains with the unemployed.