Strong Economic Growth Research Articles

Macroeconomic Research in Low-income Countries

Despite strong economic growth since 2000, many low-income countries (LICs) still face numerous macroeconomic challenges, even prior to the COVID-19 pandemic. Despite the deceleration in real GDP growth during the 2008 global financial crisis, LICs on average saw 4.5 percent of real GDP growth during 2000 to 2014, making progress in economic convergence toward higher-income countries. However, the commodity price collapse in 2014–15 hit many commodity-exporting LICs and highlighted their vulnerabilities due to the limited extent of economic diversification. Furthermore, LICs are currently facing a crisis like no other—COVID-19, which requires careful policymaking to save lives and livelihoods in LICs, informed by policy debate and thoughtful research tailored to the COVID-19 situation. There are also other challenges beyond COVID-19, such as climate change, high levels of public debt burdens, and persistent structural issues.

Global Financial Crises and Its Impact on India

Indian economy is experiencing a downturn after a long spell of growth. Industrial growth is faltering, the current account deficit is widening, foreign exchange reserves are depleting and the rupee is depreciating because of financial crises .The crises originated in United States but the Indian Government has a reason to worry because there is a potential adverse impact of the crises on India. The global economic slowdown is unprecedented in scale and has severe implications on policy formulation among emerging market. Currently India has one of the largest Developing countries in the world. Strong economic growth in the last decade combined with a population of over a billion makes it one of the potentially largest markets in the future. This paper provides an overview of global financial crisis (GFC) and its impact on the Indian Economy.

Foreign Direct Investment and Economic Growth in Kenya: An Empirical Investigation

ABSTRACT In this paper, the casual relationship between foreign direct investment (FDI) and economic growth in Kenya during the period 1980–2018 is examined. In an attempt to address the omission-of-variable bias, which has been detected in some previous studies, two variables, namely money supply and trade, are used as intermittent variables, thereby leading to a system of multivariate Granger-causality equations. Using the ARDL bounds testing approach, the results show that there is a unidirectional causal flow from economic growth to FDI in Kenya. These results apply, irrespective of whether the causality is conducted in the short run or in the long run. Based on these results, it can be concluded that the current burgeoning FDI inflows that Kenya has attracted in recent years are largely driven by the strong economic growth and prudent macroeconomic policies that the country has been pursuing in recent decades. Policy implications are discussed.

Analysis of the cross-region risk contagion effect in stock market based on volatility spillover networks: Evidence from China

This article uses the stock market regional indexes of 31 provinces (include Province-level municipalities and Minority Autonomous Regions) in mainland China as a sample, and constructs an inter-regional volatility spillover network of China’s stock market based on the GARCH-BEKK model. Through network centrality analysis, Diebold and Yilmaz's spillover index method and block model analysis, we comprehensively analyze the risk contagion effect among different regions in China’s stock market. The empirical results show that: (i) The risk contagion intensity (risk reception intensity) in various regions of China’s stock market has a typical “core-periphery” distribution characteristic due to regions’ different levels of economic development. (ii) There are obvious risk spillover effect in China’s stock market, among which the economically developed regions along the southeastern coast of China, such as Beijing, Shanghai, Zhejiang and Jiangsu, are the main risk transmitters, while the economically undeveloped regions in the Midwest of China, such as Xinjiang, Xizang, Gansu, Nei Menggu and Qinghai are the main risk receivers. (iii) Each region is divided into 4 blocks according to their respective roles in the risk spillover process in China’s stock market. Block 1 that is composed of the economically underdeveloped regions in the Midwest is the “main benefit block”, it acts as a “receiver”. Block 2 that is composed of regions with strong economic growth vitality in the Midwest is a “Bilateral spillover block”, it both plays the role of “receiver” and “transmitter”. Block 3 that is composed of developed regions along the southeast coast, it acts as a “transmitter”; Block 4 that is composed of the relatively fast-growing regions in the Southwest is the “brokers block”, it serves as a “bridge”. The results of this article can provide some reference for investors in financial institutions and decision makers in financial regulators.

Policies to Help the Working Class in the Aftermath of COVID-19: Lessons from the Great Recession

The COVID-19 pandemic and the associated government mandated shutdowns caused a historic shock to the U.S. economy and a disproportionate job loss concentrated among the working class. While an unprecedented social safety net policy response successfully offset earnings loses among lower-wage workers, the risk of continued and persistent unemployment remains higher among the working class. The key lesson from the Great Recession is that strong economic growth and a hot labor market do more to improve the economic wellbeing of the working class and historically disadvantaged groups than a slow recovery that relies on safety net policies to help replace lost earnings. Thus, the best way to prevent a "K-shaped" recovery is to ensure that safety net policies do not interfere with a return to the strong pre-pandemic economy once the health risk subsides, and that pro-growth policies that incentivize business investment and hiring are maintained.

Impact of FDI on Economic Growth, Employment, and Poverty Reduction in Ghana

The Republic of Ghana is one of the most economically developed countries in West Africa. In the past 10 years, Ghana’s economy has maintained a sound momentum and strong economic growth. The Republic of Ghana regards foreign direct investment (FDI) as a key factor in promoting its economic growth. This article separates economic growth, employment and poverty reduction, and focuses on the single impact of foreign direct investment (FDI) on Ghana’s economic growth, employment and poverty. The research in this article shows that foreign direct investment can promote the economic development of Ghana, and foreign direct investment can increase employment opportunities in Ghana and reduce poverty at the same time. Finally, this article gives corresponding recommendations based on the research conclusions: In maintaining sustainable economic growth, favorable policies should be adopted to encourage and support Ghana, so as to attract more foreign direct investment to stimulate economic growth.

Planning for Growth: Contradictions in the Framework of Economic and Urban Development from the “Spanish Miracle” (1959-1973)

In the postwar period, the strong economic growth in Western countries coincided with the configuration of their modern urban planning systems. This article aims at exploring to what extent the targets of the economic planning that was broadly adopted in this growth period conditioned the performance of urban planning tools by analyzing the case of Spain. During the so-called “Spanish miracle” that started in the early 1960s and lasted until the mid-1970s, there were notable contradictions between economic and spatial planning policies and between the performance of the national and the municipal governments. It is concluded that the lack of an integrated approach to regional and urban planning policies at national level combined to the gap with the actual local planning framework, illustrated through the example of three cities, can help to understand the patterns of urban growth in a context of an expanding economy.

Sowing the seeds of financial imbalances: The role of macroeconomic performance

The seeds of financial imbalances are sown in times of buoyant economic growth. We study the link between macroeconomic performance and financial imbalances, focusing on the experience of the United States since the 1960s. We first follow a narrative approach to review historical episodes of significant financial imbalances and find that the onset of financial disturbances typically occurs when the economy is running hot. We then look for evidence of a statistical link between measures of macroeconomic conditions and financial imbalances. In our in-sample analysis, we find that strong economic growth is followed by a buildup of financial imbalances across all dimensions of the National Financial Conditions Index. In our out-of-sample analysis, we find that the link between strong economic performance and increases in nonfinancial leverage is particularly strong and robust. Using a structural VAR identified with narrative sign restrictions, we also demonstrate that business cycle shocks are important drivers of nonfinancial leverage.

Development for water, food, and nutrition security in a competitive environment—An Asian perspective*

AbstractThe theme of the Third World Irrigation Forum “Development for water, food, and nutrition in a competitive environment” is highly relevant for Asia. Strong economic growth and an increasing population resulted in an unprecedented pressure on water resources. The first sub‐theme “Enabling policy environment for water, food, and energy security” aligns well with the Asian Development Bank's (ADB) Strategy 2030 which recognizes the water‐food‐energy nexus as critical. Asia is a hotspot of water insecurity, and cognizant of this the ADB has developed the Asian Water Development Outlook which focuses on water security. The newest edition, currently under development, expands the outlook to include actionable indicators. Water productivity should improve significantly to meet future challenges; the ADB is a pioneer in using remote sensing‐based water productivity measurements in irrigation systems for guiding and monitoring investments. Circular water use in closed systems would be an alternative as well. Operation and maintenance of irrigation and drainage systems is crucial for sustainability, the ADB uses innovative financing to address this. Feminization of agriculture occurs in many member countries and increasingly projects focus on gender and equality. Recently, the first project among irrigation projects categorized as gender equality has been developed for Tajikistan.

Institutional quality and CO2 emission–output relations: The case of Asian countries

Although Asian economies have registered strong economic growth over the last few decades, their growing pollution emissions raise concerns among the policymakers about the sustainability of this output growth. This paper tests the causal relationship between economic development, energy consumption, trade openness, financial development, FDI, government expenditures, institutional quality. and pollution emissions for 41 Asian economies from 1996 to 2015. Further, we separately test the impact of political and economic institutions on pollution emissions of the sample economies. Our estimated outcomes, based on the panel cointegration method and panel vector error correction models (VECM), substantiate the presence of a cointegration relationship among all the selected variables. While economic development, energy use, trade openness, and FDI augment environmental degradation, financial development and better economic institutions help the selected countries in reducing their pollution emissions. Moreover, better economic and political institutions also mediate the adverse impact of income, trade openness, and FDI on pollution emissions. The VECM model shows that per capita GDP is the only variable having a causal effect on pollution emissions in all the models. For all the other variables, the causal effect is significant only in a few cases. These outcomes have some important policy recommendations for the sample economies.

Estimating the Fiscal Reaction Function for Namibia

This paper estimates the fiscal reaction function for Namibia with the aim of establishing how the Government of Namibia responds to changes in debt levels. The VECM and the ARDL models were adopted to explore the reactions between the two variables. Both the VECM and ARDL confirmed the long-run relationship between the variables and showed that government increases its primary balance (i.e. reduce its primary deficit) by 0.07 percent and 0.31 percent, respectively, for every 1 percentage increase in debt levels. On one end, the results from VECM indicated that fiscal policy in Namibia is pro-cyclical, reflected in a positive estimated effect of the output gap on the primary balance. On the other end, the ARDL model indicated an insignificant relationship between the output gap and the primary balance. The debt targeting analysis performed provides evidence that it is not enough to only reduce the primary deficit for fiscal sustainability. Instead, it is important to grow the economy and improve the ability of debt repayment so that debt accumulation declines. Thus, the paper recommends that Namibia needs not only a positive, but also a strong economic growth if it is to make significant impacts on the debt level and guarantee both debt and fiscal sustainability.

Do material efficiency improvements backfire?: Insights from an index decomposition analysis about the link between CO2 emissions and material use for Austria.

To keep global heating and other negative consequences of socioeconomic activities within manageable boundaries, industrialized countries must undergo substantial decarbonization, requiring the exploitation of synergies with other environmental endeavors. Improving resource efficiency—that is, reducing the resources required to generate a unit of economic output—is a prominent goal pursued across levels of scale. How does resource efficiency relate to decarbonization? Do economies decrease their emissions as they become more efficient? We examine this relationship for Austria from 2000 to 2015 by conducting an index decomposition analysis at the sectoral level by using consumption‐based indicators from the multi‐regional input–output model Exiobase. Our analysis shows that for Austria, the currently popular pursuit of material efficiency appears to run the risk of coinciding with higher emissions, suggesting that the opportunities to achieve both decarbonization and dematerialization are limited. The Austrian service sectors could contribute to a reduction of the CO2 footprint via material efficiency improvements, but strong economic growth foils this possibility coming to fruition. The Austrian economy would do well to either curb demand for goods and services driving global CO2 emissions or to produce imported goods and services domestically in an environmentally more benign manner.

Does democracy help reduce environmental degradation?

The main purpose of this study is to examine the democracy-environmental degradation nexus in 26 Organization for Economic Cooperation and Development (OECD) countries from 1990 through 2015 by using panel data estimation methods, performing well under cross-sectional dependence. Empirical results are as follows: (i) Tests show that cross-section dependence exists among panel members, and slope coefficients are heterogeneous, respectively, and (ii) long-term coefficient estimation results with Augmented Mean Group estimator show that democracy, non-renewable energy consumption, and real income per capita have statistically significant negative effects on environmental quality, whereas renewable energy consumption has a positive effect. There is also no statistically significant relationship between urbanization and environmental quality. These findings show the poor functioning of democracy in addressing environmental issues among OECD countries; therefore, raising environmental quality conflicts with the Sustainable Development Goals (SDGs) of creating strong institutions and economic growth targets. Moreover, promoting renewable energy consumption may be an effective alternative in reducing environmental degradation; therefore, it can be said that promoting clean energy use and raising the SDG environmental quality targets are in harmony.

Why is traffic congestion getting worse? A decomposition of the contributors to growing congestion in San Francisco-Determining the Role of TNCs

Traffic congestion has worsened noticeably in San Francisco and other major cities over the past few years. This change could reasonably be explained by strong economic growth or other standard factors such as road and transit network changes. However, the worsening congestion also corresponds to the emergence of Transportation Network Companies (TNCs), such as Uber and Lyft, raising the question of whether the two trends may be related. Our research decomposes the contributors to increased congestion in San Francisco between 2010 and 2016, considering contributions from five incremental effects: road and transit network changes, population growth, employment growth, TNC volumes, and the effect of TNC pick-ups and drop-offs. We do so through a series of controlled travel demand model runs, supplemented with observed TNC data collected from the Application Programming Interfaces (APIs) of Uber and Lyft. Our results show that road and transit network changes over this period have only a small effect on congestion, population and employment growth each contribute about a quarter of the congestion increase, and that TNCs are the biggest contributor to growing congestion over this period, contributing about half of the increase in vehicle hours of delay, and adding to worsening travel time reliability. This research contradicts several studies that suggest TNCs may reduce congestion, and adds evidence in support of other recent empirical analyses showing that their net effect is to increase congestion. It is more data rich and spatially detailed than past studies, providing a better understanding of where and when TNCs add to congestion. This research gives transportation planners a better understanding of the causes of growing congestion, allowing them to more effectively craft strategies to mitigate or adapt to it.

Measuring the Impact of Monetary Policy on Mortgage Rates

This study examines the impact of United States monetary policies on domestic mortgage rates, incorporating a holistic set of macroeconomic variables in its analysis. Two obstacles have prevented this integration in the past: the data gap in the federal funds rate during the zero lower bound (ZLB) period; and the utilization of a single equation rather than a system of equations to model the relationship between the mortgage rate and its determinants. First, we establish that the shadow federal funds rate introduced by Wu and Xia (2015) is a valid proxy for monetary policy during the ZLB period, and we use dimensionality reduction to create proxy variables for important macroeconomic measures. Second, we utilize the generalized impulse response approach to measure in level and first difference the impact of monetary policy and the macroeconomic environment on the long-term mortgage rate. Generally, the effect of macroeconomic variables outweighs that of monetary policy. In addition, omitting macroeconomics variables overestimates the impact of monetary policy on the mortgage rate in level and first difference. For example, shocking the first difference (level) of the federal funds rate by one standard deviation overestimates the impulse responses by 15% (51%) and the variance decompositions by 27% (37%). The current research implies that a noticeable increase in the mortgage rate is associated with an economic environment characterized both by tightening monetary policy and strong economic growth. Further, the impact of monetary tightening on the mortgage rate is expected to weaken if secular stagnation continues to prevail.

PUBLIC TRANSPORT INITIATIVES IN WEST AFRICA, A CASE STUDY OF ABIDJAN

Abidjan is the principal city of the West African Republic of Cote d’Ivoire. It is the gateway city to West Africa. In 2014, the population of the city was estimated at four million people. Over the next fifteen years, this is projected to rise to nearly seven and a half million people. This continuing growth has an associated projected strong economic growth. This paper addresses the challenges associated with the provision of equitable public transport services to address the needs of the growing population. Public transport currently in Abidjan is complex consisting of both formal transport in the form of public bus services and several forms of informal public transport. In order to understand the existing travel trends and especially the declining public transport proportion in Abidjan, a series of surveys were undertaken for the development of an analytical methodology. This included amongst others an interview survey of people at the household level and public transport opinion surveys. The methodology thus developed allowed an understanding of the impact of new proposed infrastructure. The introduction of new infrastructure in the form of a higher level of public transport and an enhanced regulatory format will enable the implementation of an environmentally friendly public transport with a growing market share.

ПІВДЕННО-СХІДНА АЗІЯ ЯК СТРАТЕГІЧНИЙ РЕГІОН В ЗОВНІШНЬОПОЛІТИЧНІЙ СТРАТЕГІЇ КНР

Стаття присвячена аналізу зовнішньополітичної стратегії КНР щодо країн Південно-Східної Азії. Проаналізовано основні виміри зовнішньої політики КНР в регіоні Південно-Східної Азії. Наголошується на важливості морських комунікацій регіону для безпеки КНР в цілому. По мірі потужного економічного зростання КНР, щоб стати великою торговою державою з постійно зростаючим попитом на нафту, що імпортується і природний газ, а також з більшою частиною імпорту енергоносіїв транзитом через Малаккську протоку, безпека Південно-Східної Азії на морських комунікаціях має вирішальне значення для безпеки КНР. Підкреслено, що забезпечення безпечного буфера по периметру своїх кордонів є для Пекіна однією з першочергових цілей.Мета дослідження – проаналізувати важливість Південно-Східної Азії як стратегічного регіону зовнішньополітичної стратегії КНР в контексті дослідження перспектив розвитку відносин між країнами та їх впливу на китайсько-американську взаємодію.Доводиться, що одним з основних чинників зацікавленості КНР в регіоні є створення сприятливих економічних умов для розвитку країни в довгостроковій перспективі. Визначено, що основними інструментами інституціоналізації відносин між країнами АСЕАН та КНР є практична реалізація зон вільної торгівлі та спільне впровадження регіональних проектів співробітництва.Доведено важливість побудови стабільної двосторонньої співпраці в контексті реалізації Пекіном геоекономічної ініціативи «Один пояс, один шлях». Даний проект передбачає укладення двосторонніх меморандумів про співробітництво з державами, розташованими на транспортних євразійських маршрутах.Оцінено вплив американо-китайського суперництва на регіональну трансфігурацію сил в Південно-Східній Азії. Підкреслена стратегічна зацікавленість США в регіоні через те, що постійною складовою зовнішньої політики Америки було недопущення того, щоб інша держава могла домінувати в регіоні.З’ясовано, що Пекін стурбований потенційною дестабілізацією поблизу своїх кордонів. Ось чому основною метою південно-східного напрямку китайської стратегії стає не стільки одноосібне володіння енергоресурсами Південно-Китайського моря, скільки забезпечення політичної та економічної безпеки, необхідної для довгострокового сталого розвитку.

Do preferences to reduce health risks related to air pollution depend on illness type? Evidence from a choice experiment in Beijing, China

This study elicits preferences for clean air in a fast-developing context with increasing regulatory efforts and widespread adoption of self-protection measures against air pollution. We examine whether willingness to pay (WTP) to reduce mortality and morbidity risk depends on the type of illness caused by the pollution. Three major illnesses attributable to air pollution are examined in a choice experiment in Beijing, China. We find robust evidence, testing for both observed and unobserved preference heterogeneity, that WTP does not vary by illness type, and hence, that WTP for policy purposes should not be differentiated based on illness type. We also find that income, education, gender and other factors related with risk vulnerability well predict self-protection, and that respondents who engage more in self-protection have stronger preferences for public interventions. Our results suggest a value of a statistical life (VSL) and value of a statistical illness (VSI) of RMB 5.54 million (USD 1.58 million) and RMB 0.82 million (USD 0.23 million), which are higher than earlier estimates in China. This imply that for societies with strong economic growth and significant pollution, VSL and VSI are likely to increase rapidly, further strengthening the role of policies on pollution control and public health.

The China paradox: the endogenous relationship between law and economic growth

An enduring paradox of China’s remarkable economic growth is the lack of a well-established legal system. By drawing on the credibility thesis, this paper proposes that legal and economic reforms give rise to, and reinforce, the other and the market is underpinned by evolving institutions that are shaped by the expectations of the actors in the economy. It is thus not the form of institutions but their function that is more important in assessing institutional performance. A comparative examination of the USA at a similar stage of legal-institutional development to China provides support for an evolutionary, endogenous process. This institutional analysis will focus on key issues of economic legislation, such as corporate law, patent law and securities. Analyzing the relationship as complementary processes can help explain the paradox of strong economic growth within an under-developed system of law with potential, critical implications for institutional development in other countries.

Responsiveness, If You Can Afford It: Policy Responsiveness in Good and Bad Economic Times

Traditional theories of representation posit that political parties have incentives to respond to public opinion, which, in turn, is reflected in public policy as parties come together to form governments. Absent from this chain of representation, however, is the notion of costs. We advance the study of policy responsiveness by arguing that the government’s cost of responding to the electorate is marginal under conditions of strong economic growth but considerable during hard economic times. Cross-national analyses of voters and government welfare policies produce results that are consistent with this expectation. The findings imply that democratic performance, expressed as responsiveness, is conditional on economic growth.