Volatile Economic Growth Research Articles

Determinants of financial inclusion in Latin America and the Caribbean

ABSTRACT Financial inclusion is an important determinant of local economic development. Lack of adequate access to formal financial services can have detrimental effects on households, such as hampering liquidity levels. The benefits of financial inclusion could be especially important in Latin America and Caribbean, a region with modest and volatile economic growth, savings, and investment levels. The objective of this paper was to examine the determinants of financial inclusion in Latin America and the Caribbean region. Overall, our results indicate that greater income and education levels are associated with higher probability of financial inclusion.

Economic growth in Norte Santander, Colombia, and the effects of the armed conflict

The objective of this work is to estimate the armed conflict effects on the economic growth of Norte de Santander from 1988 to 2012; starting with an economic characterization and some aspects of the armed conflict in the period 1988 - 2012, through an econometric model, according to Cobb-Duglas function from the Solow-Swan model. The Department has experienced volatile economic growth with weaknesses in its productive development, and that has been very important by the armed conflict leaving a humanitarian tragedy. The econometric results show that the appropriation of illegal income by armed groups outside of the law, and the guerrilla attacks on infrastructure have negative effects on economic growth, while public spending has a positive relationship with the growth, it is expected that this work will contribute to the debate for the post-conflict scenario, and that it will serve as input for the development of public policy in the department, and mostly the importance of peace for the economy.

Does Regime Choice Affect Exchange Rate Volatility-Economic Growth Link? An Application of Panel-VAR Approach

ABSTRACTIn recent years, numerous studies demonstrated that the effect of exchange rate regimes on economic growth is influenced by several factors. However, the literature rarely takes into account the possible costs associated with improving institutional quality on the choice of exchange systems and the analysis of the effects of shocks in the case of each type of regime. Throughout this research, we analyze the extent of bidirectional shocks according to each regime and compare the shock effects accordingly. The results show that the real exchange rate is less volatile and the shock effect is lower in countries that adopt a fixed exchange rate regime while the exchange rate is more volatile and the shock is higher in countries that adopt a flexible exchange rate regime. To show the effect and persistence of shocks, we carried out a Panel-VAR regression completed by impulse response functions, VAR decomposition and Granger causality tests for 20 countries adopting the first type of exchange regime compared with 20 countries practicing an alternative exchange rate regime in the period from 1996 to 2012.

Toward a Sustainable Future: Assessing the Impact of Extractive Industries on Sustainable Development in Africa

Mining in Africa has contributed to significant economic growth in some countries. Indeed, these sectors have held the promise of raising incomes and living standards for citizens of resource-rich countries the world over. Numerous African countries today increasingly finance their development through resource extraction. For a continent endowed with a seemingly endless bounty of resources, the allure of rapid economic growth and development funded solely by proceeds from resource extraction have led many African governments to ignore the pitfalls of these industries and become resource-dependent nations. Consequently, the lack of effective strategies, legal frameworks and policies to negotiate, regulate and enforce extraction contracts in transparent and accountable ways have left many African countries unable to take full advantage of their natural wealth. Moreover, the failure of some to insist upon environmentally and socially sustainable resource extraction has spawned a host of associated problems: environmental degradation, volatile economic growth, limited job creation, violent conflicts, endemic poverty, health problems and corruption. These adverse outcomes, however, are not inevitable. Indeed, some African countries have managed to beat the resource curse, using the proceeds from extractive industries to diversify their economies and invest in their human, social, physical and financial capital. This paper thus seeks to assess the successes and failures of African governments to utilize their resources sustainably. It draws upon the experiences of Nigeria, Algeria, the Democratic Republic of Congo and South Africa to document the strides Africa has made toward sustainable development. Using the United Nation’s Sustainable Development Goals (SDGs) as a backdrop, the paper further seeks to assess the challenges many African governments still face and the effective strategies and legal frameworks that may be adopted with regard to the exploitation and extraction of Africa’s mineral resources.

Structural change and productivity growth in Mexico, 1990–2014

Mexico, as other Latin American countries, undertook far-reaching economic reforms in the 1980s and 1990s in a wide array of areas. Over the past three decades, the Mexican economy has gone through a structural change and experienced a successful insertion into global markets. Yet productivity growth has been modest, leading to low and volatile economic growth. To examine the weak association between structural change and productivity growth, two features are studied: inter- and intra-industry transformations, and the contribution of production factors to value added growth. The paper shows that despite a significant reallocation of hours worked across industries, its aggregate impact has been hindered by the prevalence of flows from sectors with high labor productivity growth towards those with lower or declining productivity growth. In addition, highly qualified production factors (both labor and capital) have not showed a significant contribution to value added growth.

The resource curse without natural resources: Expectations of resource booms and their impact

Many resource-rich countries have experienced a range of negative economic and political effects from natural resource extraction, often lumped together as the ‘resource curse’. This article investigates to what extent expectations of future natural resource booms in Sao Tome e Principe and Madagascar led to ‘resource curse’ effects, even though these countries did not experience the expected booms. It finds that both countries experienced resource curse effects as a result of future expectations, including volatile economic growth and eroded governance. The article demonstrates that shared aspirations and expectations alone may make for material political and economic outcomes even when they become visibly divorced from reality. Thus, there is much more to resource curse effects than simply the product of the material extraction of natural endowments. At a time of extremely volatile prices for primary commodities, and the relatively easy availability of investment capital and credit to support speculative ventures that in turn incentivize resource hype, it is likely that a growing number of countries may suffer the malign effects of a resource curse without natural resource extraction.

Exchange rate volatility–economic growth nexus in Uganda

ABSTRACTThe global financial crisis has disrupted trade and capital flows in most developing economies, resulting in an increased volatility of exchange rates. We develop an autoregressive distributed lag model to investigate the effect of exchange rate volatility on economic growth in Uganda. Using data spanning the period 1960–2011, we find that exchange rate volatility positively affects economic growth in Uganda in both the short run and the long run. However, in the short run, political instability negatively moderates the exchange rate volatility–economic growth nexus. These results are robust to alternative specifications of the economic growth model.

Multiplier effects on socioeconomic development from investment in renewable energy projects in Egypt: Desertec versus energy for local consumption scenarios

Egypt is considering initiatives to deploy renewable energies, such as solar and wind; these would be financed through national and international public funds and private investment. Direct and induced impacts of investments could be significant drivers of socioeconomic development in Egypt, which currently has high level of poverty and unemployment plus volatile economic growth due to recent political upheaval. The initiatives would have two goals: i) export of electricity from renewable sources to Europe; and ii) generation of electricity to satisfy Egypt's growing energy needs. We thus posed two research questions: i) what are possible effects of investment in concentrating solar power (CSP), at a scale that would attract national and international policy incentives; and ii) what are effects of investment in CSP compared with the effects of a) the business-as-usual scenario, b) the DESERTEC investment plan, which foresees a large share of electricity being exported to Europe, and c) the national energy targets, under which CSP will be deployed to satisfy local energy demand. Our method is Social Accounting Matrix (SAM) of Egypt and the Leontief Input-Output model. Our results show that even though impacts from investments foreseen by the DESERTEC scenario will be highest in terms of GDP, output will be higher in the case of the scenario aiming to secure local demand of electricity from CSP. However, under this scenario, the income multiplier impacts will be the lowest, compared with the DESERTEC and business-as-usual scenarios.

Review of Risks to Communities from Shale Energy Development

Although shale energy development can bring infusions of money and jobs to local communities, an array of risks to community-level assets and institutions is also possible. Sociological research dating back to the 1970s links rapid oil and gas development with overburdened municipal services, upended social and cultural patterns, and volatile economic growth. Research on technological risk has demonstrated communities can come to be associated with pollution and contamination, resulting in out-migration, declining amenity-led development, and decreased financial investment. Emerging shale energy case studies in Wyoming, Pennsylvania, North Dakota, and Texas show a similar, although nuanced, picture of these concerns. Yet, little data exists on the prevalence or magnitude of these risks in the current context of shale gas development. The existing research has largely remained case-based in nature, has not been synthesized across various disciplines, and has not been updated to account for various social and technological trends that have occurred since its publication. This paper offers a critical review of major research endeavors that inform our knowledge of risk to communities from shale energy development, while identifying gaps in our understanding of these risks and areas of research need.

Oil, Domestic Politics, and International Conflict

Oil politics is a major force in global and domestic politics, especially in developing countries. Oil income makes oil-producing “petrostates” vulnerable to the resource curse, the symptoms of which include pervasive corruption, wasted public spending, volatile economic growth, and more frequent civil wars and domestic conflict. Yet while common tendencies are observable among the group of petrostates, there are also important and systematic differences among them. States that are petro-revolutionary – having both oil income and a revolutionary leader – tend to instigate conflicts at a rate three and a half times that of a comparable “typical” state (one without oil or a revolutionary leader). Indeed, the tendency of petrostates to get into international conflicts cannot be explained without disaggregating the group. This research thus emphasizes the point that oil does not have a single, monolithic effect, but rather it interacts with domestic politics in a complex way.