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This paper constructs the broader Divisia monetary aggregate (D2) for the Kingdom of Saudi Arabia over the period from 1999 to 2018. Unlike the traditional money supply aggregate (M2), movements of the Divisia monetary aggregate seems to reflect the domestic economic developments and hence can be very useful when setting macroeconomic policies in the Kingdom. In addition, the paper applies the Keynesian Money Demand Theory to estimate the demand for money using the Divisia monetary aggregate. The findings confirm the stability of the money demand function for Saudi Arabia. [ABSTRACT FROM AUTHOR]

The paper analyses the impact of public capital on the Japanese manufacturing industries from 1970 to 1995. Unlike previous studies, which are based mostly on economy-wide analysis, this study is based on a disaggregated analysis at the industry level. A Generalized Leontief cost function is utilized to estimate the impact of public capital on nine manufacturing industries in Japan. The results indicate that public capital offers no insignificant contribution to the productive performance of these manufacturing industries except for Paper, Textiles and Transport. The paper also suggests that the bubble economy in the 1980s is the contributing factor behind this insignificant effect of public capital. [ABSTRACT FROM AUTHOR]

The paper hypothesizes that the quality of institutions tends to evolve slowly and in a piecemeal nature over time. In this process policy is seen to be a mechanism through which this evolutionary process takes place. Policy influences intermediary variables, which in turn create opportunities for institutional innovation. There are two hypotheses derived from this analysis and tested empirically in the paper. It is hypothesized that improvements in institutional quality lead to increases in economic development (using two different measures). It is also hypothesized that changes in intermediary variables resulting from policy changes lead to improvements in institutional quality. These two hypotheses are tested using a panel data set made up of twenty-five countries in Africa. The results indicate that improvements in the quality of governance institutions do lead to improvements in economic development and that policies aimed at influencing intermediary variables lead to improvements in governance institutional quality. [ABSTRACT FROM AUTHOR]

This paper examined the impact of fiscal policy on non-oil GDP in Saudi Arabia, the world's largest oil exporter, over the annual period 1989–2018. We employed various cointegration methods within the framework of the augmented production function and estimated that government current and capital expenditure, in addition to non-oil labour and capital, have statistically significant positive effects on non-oil GDP. We tested whether the recent oil price decline and the implemented economic reforms caused a break in the relationship that non-oil GDP establishes with the mentioned variables and found that there was no break in either the long-run or the short-run relationship. The study concluded with some policy insights that could be useful for fiscal authorities to promote non-oil economic development. [ABSTRACT FROM AUTHOR]

This paper provides an empirical framework to assess the nonlinear complementary linkage effects that arise from the interaction between motorway capital and information and communications technology (ICT) capital in developed economies. Using panel data from the Organisation for Economic Co-operation and Development (OECD) member countries and controlling for endogeneity, the paper finds that there exists a critical mass for ICT capital such that if the capital grows beyond the critical mass, the marginal contribution of motorway capital to productivity growth increases as the motorway is extended. This empirical result explains variations in the productivity contributions of transport infrastructure across countries that differ in their ICT infrastructure and has implications for setting the investment priorities of key components of infrastructure. [ABSTRACT FROM AUTHOR]

This paper studies the empirical relationship between population's health and real GDP dynamics in low- and middle-income countries. We employ a semi-parametric technique, which combines mixed panel data models and cluster analysis to account for unobserved heterogeneity, an important source of estimation bias in growth regressions. We estimate a version of the Solow growth model augmented with human capital, in the form of both education and health. Our estimates show that population s health, here proxied by the life expectancy at birth, has a positive, sizable, and statistically significant effect on both the level and the growth rate of the real per capita GDP. [ABSTRACT FROM AUTHOR]

This paper studies regional economic development on the municipality-level in Poland and Germany along the Oder–Neisse border. We use high-quality satellite night-time light intensity data as an innovative and comparable measure to proxy for overall economic activity on both sides of the border consistently over a long period of time (1992–2012). We use descriptive heat maps as well as regression analysis to investigate two aspects: first, how far is the economic convergence along the Polish-German border? Second, what effect does the distance to the border have on economic activity as measured with light emissions? Our findings suggest that convergence in overall activity across the border has been complete. Polish municipalities that used to be economically much weaker have caught up with those on the German side of the Oder and the Neisse rivers. As regards the importance of distance, we highlight different results for Germany and Poland. While distance to the border never mattered significantly for German regions, Polish municipalities closer to the border used to be substantially worse off in the early 1990s but caught up with regions further to the east by the end of the period of our analysis. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of digital financial inclusion on illegal fundraising activities in China. From the China Judgments Online website, we extract data of criminal court cases of illegal fundraising from 2013 to 2019, during which both the illegal fundraising court cases and the development of digital finance displayed a rising trend. We then evaluate if digital financial inclusion may have worsened illegal fundraising activities. We find that digital financial inclusion has a positive effect on illegal fundraising activities. This effect remains robust under alternative measures of the intensity of illegal fundraising activities and when instrumental variable estimations are used to tackle potential endogeneity problems. Furthermore, convenient banking services are an important channel through which digital financial inclusion exerts its positive impact on illegal fundraising. Therefore, while active promotions of digital finance could benefit economic development, it is also necessary to timely improve the supervision of emerging finance to guard against financial risks. [ABSTRACT FROM AUTHOR]

This paper explores how discontinuities created by national borders can influence development across the Americas. We exploit the discontinuous nature of borders jointly with exogenous variation at the national level to identify discontinuous effects on proxies for economic development at the regional and pixel levels. We separate the effects of national institutions from local historical conditions. Our analysis yields three main findings. First, we find important discontinuities in development across national borders for the Americas. Second, we also show that they are, for the most part, caused by institutional differences at the national level and not for differences at the regional level in geography, climate, endowments, and pre-colonization conditions. Third, we also present evidence that differences in national institutions affect human capital at the regional level. [ABSTRACT FROM AUTHOR]

This paper applies the incomplete contracts model to study an optimal banking structure corresponding to different levels of technological development from the perspective of technological innovation. The findings indicate that, with the development of technology, there exists an optimal banking structure that matches the real economy and has a dynamic evolution in different stages of economic development. At the same time, an optimal banking structure depends on the level of technological development, which seems to render invalid the argument that one structure is absolutely better than the other. Finally, the paper empirically analyzes the impact of banking structure on technological innovation using the data of China's industrial enterprises from 2005 to 2009. The empirical results show firstly that, with economic development and technological progress, an optimal banking structure that promotes technological innovation is biased towards a monopoly structure. Secondly, from the perspective of the sub-regional level of technological progress, a competitive banking structure is more conductive to technological innovation in low-tech areas but, in medium- and high-tech areas, a monopolistic banking structure will further promote technological innovation. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to examine the issue of omitted variables in testing the long run validity of Wagner's hypothesis. Using UK data for the period 1948 to 1997, this paper first investigates the secular relationship between public spending and economic development in a bivariate system. In all cases considered, our bivariate cointegration tests indicate the absence of a long run equilibrium condition. However, the introduction of a third variable (money supply) re-establishes a cointegrating relationship between public expenditure and economic development variables. In addition, the results of the Granger's multivariate causality test indicate a unidirectional causality from income and money supply to public spending in the long run, thus providing support for Wagner's hypothesis. [ABSTRACT FROM AUTHOR]

This paper provides a novel investigation of whether budgetary spending on economic development programs converges across US states. States use a wide array of tax and subsidy programs to try to attract firms in a highly competitive environment. If states engage in strategic tax and incentive competition as previous literature suggests, we should expect economic development spending to converge over time. Using a national database of state 'out of pocket' economic development expenditures, we apply the panel convergence method developed by Phillips and Sul (2007, 2009) which endogenously identifies the number and members of convergence clubs. We find that states flock together in three spending clubs which reflect socioeconomic characteristics. The existence of multiple clubs with heterogeneous spending patterns reveals the complexity of state-level budgetary efforts put towards economic development programs. [ABSTRACT FROM AUTHOR]

This paper examines whether a long-run relationship exists between CO2 emissions and selected variables: real gross domestic product per capita, inward stock of foreign direct investments, gross fixed capital formation, industry, value added and energy use per capita for Colombia, Indonesia, Viet Nam, Egypt, Turkey and South Africa countries in the period of 1989–2016. We used panel unit root testing, followed by panel cointegration tests and panel causality. The results clearly prove the existence of a bidirectional long-run causal relationship between all the variables except between CO2 emissions and GDP and CO2 emissions and GFCF. Major finding of the short-run causality analysis is that CO2 emission in the short run does not result in changes of other variables. On the other hand, all variables except foreign direct investments (FDI) cause the changes in the CO2 emissions, and there is a positive bidirectional causal relationship between GDP and FDI, between GFCF and FDI, and between GFCF and IVA. Finally, positive unidirectional causal relationship also exists, running from GDP to IVA, GDP to ENUSE, IVA to FDI and ENUSE to FDI. [ABSTRACT FROM AUTHOR]

This paper tests the Wagner's assumption of the one-sided directional flow moving from economic growth to public spending considering an international database over the 1996–2012 period. By using indicators on the level of country control of corruption, government effectiveness, political stability, rule of law, regulatory quality and voice and accountability, the paper analyses the economic performance-public spending nexus controlling for the quality of the institutions. The empirical evidence supports the existence of the Wagner's law, showing that, in the short-run, public spending positively reacts to a positive shock in national income, with a lower magnitude for democratic countries. In the long run, the error-correction model shows the convergence between public spending and national output occurring less quickly for non-democratic, low-income and to a smaller extent for non-OECD countries. Institutional quality, such as effort in controlling corruption and the presence of regulations that permit and promote private sector development, may help reducing the amount of per capita public spending and making it more productive. Higher expenses in compositional amenities such as public services for the elderly may explain why public spending per capita will increase the most in economies with a higher share of the population that need healthcare facilities. [ABSTRACT FROM AUTHOR]

This paper provides new evidence on a traditional finance–growth nexus through dividing financial services into financial intermediation and non-intermediation services and examining their relationships with economic growth. Applying time-series cointegration techniques and Granger causality tests for eight Organization for Economic Cooperation and Development (OECD) countries, reveals several results. First, there is a long-run equilibrium relationship among economic growth, intermediation activities, and non-intermediation activities in Austria, France, and Korea. Second, non-intermediation services impede long-run economic growth in Austria and France, whereas non-intermediation business and financial intermediation services accelerate Korea's long-term growth. Third, weak exogeneity tests support long-run bi-directional causality and the supply-leading hypothesis in terms of the relationship between financial services and economic growth. Finally, the influences of intermediation and non-intermediation activities on economic growth vary across countries, financial services, and time periods, indicating that countries should adopt different financial services to enhance long- or short-term economic growth. This paper emphasizes the importance of non-intermediation activities in the growth process and in the development of intermediation services. [ABSTRACT FROM AUTHOR]

This paper adds to the debate on the relationship between foreign direct investment (FDI) and economic growth which suggest that the link between FDI and economic growth is rather the consequence of both FDI and growth responding endogenously to economic integration. We investigate if the impact of FDI on growth is dependent on the channel of integration used to attract FDI. We use four different indexes of economic integration including Trade Openness, Chinn-Ito, and KOF and our newly constructed index of financial integration. We employ these four indexes to investigate the role played by economic integration in linking FDI and growth. We use a panel consisting of 134 developing countries and data spanning the period 1989-2017 estimated using the generalized method of moments (GMM) technique. The results show that FDI is an important determinant of growth. The results also suggest that at least some of the integration variables do matter and work as channels to attract FDI leading to growth. However, after stratifying countries by income level, we also find that integration matters mainly for high income countries. Integration variables for other income groups do not show much significance. These are interesting results and may have important policy implications. [ABSTRACT FROM AUTHOR]

Rapid development of High-speed railways (HSR) in China has attracted serious research interest. This paper proposes an endogenous economic growth model to explain how and why HSR may lead to faster economic growth and regional convergence in China using data from 285 cities in 2010–2014. TSLS estimation suggests that HSR has a powerful impact on urban economic growth and regional convergence. It suggests that HSR was a potent driver responsible for the sustainable and steady economic expansion of the Chinese regions in the aftermath of the world financial crisis. [ABSTRACT FROM AUTHOR]

The existing literature documents positive but potentially non-linear relationship between financial depth measured as private credit to GDP ratio and volatility of GDP. In this paper, we extend the analysis by considering also the role of financial depth dynamics. We use dynamic spatial panel models to address the issue of cross-sectional dependence of errors obtained from the standard dynamic panel models. We confirm the non-linear impact of the financial depth level but also find that higher growth rates of financial depth are significantly associated with higher volatility of output. The role of the latter factor is considerably more important in terms of explained variance compared to the impact of the private credit level. These results are robust to changes in the sample range, specification of the model, and measurement of the key variables. We also document considerable differences between the estimates obtained from the standard GMM and the spatial models. [ABSTRACT FROM AUTHOR]

This paper aims to quantify the crowding-out effect of public debt and the related loss in long-run output in neoclassical growth models. To accomplish this task, we incorporate the government sector into the Ramsey-Cass-Koopmans (RCK) model, the Blanchard model and the Solow model, which differ only in their assumptions concerning the consumption behaviour of households. We also introduce a general framework that is capable of gauging the burden of public debt in a neoclassical world in the case of any type of consumption behaviour. Our results are threefold. First, contrary to the RCK model, public debt reduces long-run output in the Blanchard model and the Solow model, although to a different extent: the crowding-out effect is marginal in the former, whereas it can be very large in the latter. Second, the burden of public debt is country-specific depending crucially on the saving rate and the population growth rate. Finally, in developed countries the upper limit of the output loss related to public debt is moderate at best even if distortionary taxes are taken into account. [ABSTRACT FROM AUTHOR]

The paper discusses the issues of heterogeneity and stability of cross-country growth regressions that have been used to study the problem of convergence. Almost all studies use pooled regressions. The paper considers the issue of pooling under heterogeneity using a hierarchical Bayesian method and estimates growth regressions for different panels studied in earlier papers, and different regimes. The conclusion is that the convergence rates are higher than those obtained from pooled regressions under the assumption of homogeneity and that there is instability over time in the relationships. [ABSTRACT FROM AUTHOR]

Since the 1980s, China has experienced very high economic growth, and its share in global trade has increased rapidly. Currently, however, the Chinese economy is rebalancing, and its growth is slowing. This paper investigates the spillover effects on other countries of a negative demand shock and negative stock price shock in the Chinese economy. We apply a global vector autoregressive model, which enables us to model international linkages between countries. Our results show that a one per cent negative China GDP shock reduces global growth by 0.22% in the short run. We find that GDP shock affects emerging economies more strongly than advanced economies. We also show that a stock price shock affects only emerging economies and does not affect advanced economies. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between government size and economic growth and determines the optimal level of government spending to maximize economic growth. The paper applies a dynamic panel data analysis based upon a threshold model to test the threshold effect of government spending in 26 transition economies over the period spanning 1993-2016. According to the analysis results, government expenditures have a threshold effect on economic growth, and there is a non-linear relationship depicted as an Armey curve in these transition economies. The findings indicate that a government size above the threshold government spending level adversely affects economic growth, while a government size below the threshold level has a positive effect. Furthermore, there is a statistically significant relationship between the two variables above and below that optimal level, even if we divide the sample into developed and developing countries. Our findings suggest that governments in transition economies should consider optimal government size at around the estimated threshold level to support sustainable economic growth. [ABSTRACT FROM AUTHOR]

This paper contributes to the governance literature by analyzing the specific mechanisms through which governance affects economic growth: The credit channel. Specifically, it investigates the growth impact of governance on industries with different levels of dependence on external finance. Better governance mitigates credit market imperfections by increasing transparency and accountability and reducing government-policy distortions, promoting productive investment and entrepreneurship development, with a disproportionate impact on sectors that depend on external finance. This paper indeed finds that countries with well-functioning governments are better at providing growth and investment environments for the expansion of industries that rely heavily on external finance and the formation of new establishments in these industries, when controlling for financial development. These results are robust to possible reverse causality, different specifications, subsamples and outliers. [ABSTRACT FROM AUTHOR]

This paper studies the relationship between economic development and within-country income inequality using satellite night-light data for a panel of 49 African countries. We highlight three worrisome facts describing regional income disparities in Africa, which rank among the highest in the world, they are persistent, and they have increased 2.16% annually over the period 1992–2012. Our instrumental variable (IV) results confirm the existence of a regional Kuznets curve characterized by an inverted U curve, implying that although economic progress increases regional income inequalities at first, this positive link eventually flats out at a certain level of GDP per capita (2200 constant USD) and turns to reduce income inequality as further as GDP per capita still increases. We also find that the positive impact of total trade on regional income inequalities disappears once we account for potential endogeneity issues. Aid flows, FDI, industry, oil rents, government share, and institutions present positive correlations and reinforce our main results. Our conclusions should raise the concern for policymakers and economists to enhance policies towards a more prosperous, inclusive, and sustainable economic future in Africa, especially in the least developed countries. [ABSTRACT FROM AUTHOR]

The article proposes and implements a small macroeconomic model which innovatively captures the issues of external imbalance, high inflation and output performance with reference to stabilization policies in the Solomon Islands (SI) economy. Most developing countries (LDCs) are implementing stabilization policy packages aimed at restoring and maintaining macroeconomic balance. The main innovative features of the paper are four-fold. First, it considers real growth, inflation and the current account of the BOP in an integrated framework, Secondly, the model is capable of linking the macroeconomic targets directly to a number of stabilization policy instruments which are typically used by the SI government. Thirdly, the model can be used to quantify the effects of external shocks, such as changes in foreign aid and export prices, on output, inflation and the current account balance. Finally, the paper goes beyond the standard application of deterministic simulations and single-shot policy experiments, it innovatively applies stochastic simulation techniques to study the properties of the model and to conduct sensitivity experiments involving policy packages in a what-if spirit.

This paper analyses the nexus between renewable and non-renewable energy consumption, financial development, Information and Communication Technology (ICT) diffusion and economic growth, in MENA countries, over the period 1980–2018. We use the novel Cross-Section augmented Autoregressive Distributed Lag (CS-ARDL) estimation technique which accounts for cross-sectional dependence and cross-country heterogeneity issues. We find a positive impact of renewable and non-renewable energy on economic growth, but a negative effect of financial development on economic growth. We also find a positive and statistically significant influence of ICT on Gross Domestic Product (GDP). Renewable energy and ICT diffusion can be considered important determinants of improved economic activity, job creation and better environmental quality. Pairwise Dumitrescu-Hurlin panel causality tests were used to examine the causal relations among the variables. The findings of this study have considerable policy implications for the selected countries. [ABSTRACT FROM AUTHOR]

An augmented P-Star model is estimated and tested to identify the drivers of inflation in India. The model includes monetary and non-monetary factors, demand-pull and cost-push factors, and domestic as well as foreign factors. The results show that inflation in India is driven by a combination of monetary factors and non-monetary factors, some of which affect inflation on the supply side while others operate on the demand side. It turns out, however, that inflation in India is determined more by domestic rather than foreign factors. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to find the homogeneous groups and growth factors of Florida's counties through factor analysis and cluster analysis from data sets from 1979 and 2000 and to grasp the relationship between income inequality and growth by cluster using the derived growth factors. The numbers of factors divided through factor analysis were three, and six groups were obtained from cluster analysis. County-level evidence of this paper indicates that GI_DI and SIN have a strong effect and are statistically significant to the growth rate. Results for income inequality by county and region indicate significant differences between counties, including counties where agriculture accomplishes the primary main function. Therefore, government should adopt the following policies: minimum wage, unemployment insurance, local or state tax policies, income support programmes, and tax reform. [ABSTRACT FROM AUTHOR]

This paper tests empirically the Balassa-Samuelson (BS) hypothesis (i.e. rapid economic growth is accompanied by real exchange rate appreciation because of differential productivity growth between tradable and non-tradable sectors) using annual data for twenty Latin American countries. The paper applies new panel data unitroot tests proposed by Im et al. (Discussion paper, University of Cambridge, June 1997) and new panel data cointegration techniques suggested by Pedroni (Oxford Bulletin of Economics and Statistics, 1999) and the results are compared with those obtained with conventional time series unit-roots and cointegration tests. The main finding is that whereas a standard time series approach rejects the Balassa-Samuelson hypothesis for 11 countries out of 20, new panel cointegration techniques permit the rescue of this hypothesis for Latin American countries, as well as for Central American and South American groups of countries considered separately. [ABSTRACT FROM AUTHOR]

Using the framework of an endogenous growth model, this paper empirically analyses the relation between trade policies and industrial growth in Bangladesh during the period 1974-1996. The cointegration and error correction modelling approaches have been applied. The empirical results suggest that there exists a unique cointegral relation between the index of industrial production and its major determinants of investment-GDP ratio, average share of exports in GDP and secondary school enrolment ratio. The short-term dynamic behaviour of Bangladesh's industrial production has been investigated by estimating an error correction model in which the error correction term has been found to be correctly signed and statistically significant. The findings of the study show that investment share in GDP, export share in GDP (lagged four quarters), secondary school enrolment ratio, and average collection of customs duty (lagged six quarters) have all emerged as significant determinants of industrial production in Bangladesh. [ABSTRACT FROM AUTHOR]

The paper provides an assessment of the determinants of income inequality in a broader macroeconomic context. In particular the hypothesis that income inequality is related to fundamentals affecting economic growth is examined. [ABSTRACT FROM AUTHOR]

Comprehensive and international comparable leading indicators across countries and continents are rare. In this paper, we use a free and instantaneous available source of leading indicators, the ifo World Economic Survey (WES), to forecast growth of Gross Domestic Product (GDP) in 44 countries and three country aggregates separately. We come up with three major results. First, for more than three-fourths of the countries or country-aggregates in our sample, a model containing one of the major WES indicators produces on average lower forecast errors compared to a benchmark model. Second, the most important WES indicators are either the economic climate or the expectations on future economic development for the next six months. And third, adding the WES indicators of the main trading partners leads to a further increase in forecast accuracy in more than 50% of the countries. It seems therefore reasonable to incorporate economic signals from the domestic economy's main trading partners. [ABSTRACT FROM AUTHOR]

This paper aims to investigate the effects of urbanization on pollutant emissions and energy intensity in selected Asian developing countries after controlling for the effects of disaggregated (renewable and non-renewable) energy consumption, trade liberalization, and economic growth. We use both linear and nonlinear panel data econometric techniques and employ recently introduced mean group estimation methods, allowing for heterogeneity and cross-sectional dependence. However, to check the robustness of our panel results, we also apply the autoregressive distributed lag (ARDL)-bound testing approach to country-level data. In addition, the relationship between affluence and CO2 emissions is examined in the context of the Environmental Kuznets Curve (EKC) hypothesis. The estimation results identify the population, affluence, and non-renewable energy consumption as major factors in pollutant emissions in Asian countries. However, the results of the EKC hypothesis show that when countries achieve a certain level of economic growth, their emissions tend to decline. Whereas nonlinear results show that renewable energy, urbanization, and trade liberalization reduce emissions, linear estimations do not confirm these outcomes. Thus, substitution of non-renewable for renewable energy consumption, cautious and planned urbanization programs and more liberal trading regimes may be viable options for sustainable growth of these developing Asian economies. [ABSTRACT FROM AUTHOR]

In order to account for currency substitution, the exchange rate is included in the demand for money. More recent studies have demonstrated that exchange rate changes could have asymmetric effects on the demand for money or domestic currency. In this paper, we consider the experiences of 18 African countries and show that in most countries, indeed exchange rate changes have short-run asymmetric effects on the demand for money. However, short-run effects translate to long-run asymmetric effects only in a limited number of African countries. [ABSTRACT FROM AUTHOR]

This paper investigates the convergence in real gross domestic product growth focusing on the impact of financial crises (i.e. banking crises, currency crises and debt crises) and nominal exchange-rate regimes (i.e. fixed, intermediate and flexible) on convergence. To that end, we compute four convergence indicators (σ-convergence,γ-convergence, absoluteβ-convergence and conditionalβ-convergence) for 163 countries classified into four income groups during the period 1970–2011. The results suggest that (i) there is evidence in favour ofσ-convergence andγ-convergence only for high-income countries; (ii) absolute and conditionalβ-convergence are present in each of the four income groups of the countries under study; (iii) exchange-rate regimes seem to play some role in upper-middle and lower-middle-income countries; and (iv) financial crises have a negative and significant impact on GDP growth independently of the income level of the countries. [ABSTRACT FROM PUBLISHER]

By using Taiwan's census firm data, this paper estimates and tests the variable returns to scale hypothesis for aggregate manufacturing and two-digit industries. An efficiency measure is constructed to further examine the size-efficiency relations among two-digit industries. Analysis indicates that increasing returns exist at the aggregate manufacturing level and its magnitude is higher for exporting firms than for non-exporting firms. Moreover, trade is beneficial only for small firms. However, the property of increasing returns diminishes for most of the industries at the two-digit level, particularly for the exporting firms. This sharp comparison between aggregate and two-digit level results suggests that trade is conducive to productivity, and provides an indication of the specific form of technology spillovers among firms and across industries. Further investigation of the relationship between productive efficiency and firm size renders the result that optimal firm size is small for exporting firms in most industries, particularly in the most export-oriented ones. The technology spillover effect among firms and across industries is likely the reason for being small and efficient. Our results also indicate that an industry-wide spillover effect across firms within the same industry is roughly one-sixth of the firm-specific export-induced learning effect. Findings in this study provide valuable insight into Taiwan's economic development and also provide a development strategy for developing countries to follow. [ABSTRACT FROM AUTHOR]

There is a regular emphasis on the significant role of inward Foreign Direct Investment (FDI) in promoting economic growth. This favourable relationship has induced many governments to adopt policies intended to increase FDI inflows and, thereby, to create conducive business and economic conditions for Multinational Enterprises (MNEs). This paper examines the effects of Economic Freedom (EF) and its sub-components reflecting the Quality of Institutions (QIs) on FDI inflows, using indices derived from the Fraser Institute and from the Heritage Foundation. The empirical analysis is carried out for a panel dataset using different econometric methodologies and empirical specifications. The results underline positive effects of EF on FDI inflows. They reveal that EF sub-components have varying impacts on FDI inflows, where rule of law, market openness, and less-restrictive regulatory environment stand out as the major FDI-promoting institutional factors. Also, there is an empirical evidence that the effects of EF sub-components on FDI inflows exhibit variations through the economic characteristics of the host countries and across geo-economic regions. The results suggest that governments should pursue EF-improving policies, which should be tailored according to the economic and geo-economic characteristics of the host countries, to increase FDI inflows. [ABSTRACT FROM AUTHOR]

Human capital is supposed to be an important factor for innovation and economic development. However, the long-run impact of human capital on current innovation and economic development is still a black box, in particular at the regional level. Therefore, this paper makes the link between the past and the present. Using a large new dataset on regional human capital and other factors in the 19th and 20th century, we find that past regional human capital is a key factor explaining current regional disparities in innovation and economic development. [ABSTRACT FROM AUTHOR]

Foreign Direct Investment (FDI) is considered as an important instrument for economic development all over the world. The aim of this paper is to examine the FDI inflows determinants for 24 OECD countries. To this end we employ annual data from 1980 to 2012 for a series of potential FDI determinants that have been identified as the most important by the relevant literature. Our empirical strategy employs both the standard fixed effects panel as well as a dynamic panel approach. The empirical findings highlight the importance of market size, trade openness, unit labor cost, schooling, taxation, gross capital formation, institutional variables, and ROA/ROE as significant FDI determinants. In the case of the dynamic panel model those FDI inflows determinants are not uniform for all country groups. Additionally, the results indicate that corporate tax rates clearly affect FDI attractiveness. This finding is robust when testing different countries subgroups. The present study has important policy implications indicating the factors that host economies should place emphasis on in order to attract FDI inflows. Policy makers should not only pay attention to the corporate tax rate level but they should also design a simple, stable and transparent taxation system that minimizes the relevant business risk. [ABSTRACT FROM AUTHOR]

Several recent studies have focused on the predictive power of the yield spread for future economic activity. The current paper reformulates the work of Estrella and Mishkin (1998) by focusing on the usefulness of monetary variables for generating probability predictions of rising or falling real GDP growth and inflation. Besides redefining the dependent variables, the independent monetary variables are allowed to include lagged information. Also, the current paper considers the usefulness of the Divisia monetary aggregates in the context of probit models for predicting the probability that real GDP growth or inflation will be increasing [ABSTRACT FROM AUTHOR]

This paper uses a multi-equation model to achieve an overall study of two key factors which explain growth, technology and institutions. The paper focuses on the process of the accumulation of these factors and the interrelationship arising among them. A theoretical model is given, together with empirical evidence for the joint impact of these factors on economic growth in a wide-ranging sample of countries between 1985 and 1997. This paper also contributes certain novel aspects in the variables employed. Thus, an indicator of human capital and an index reflecting institutional infrastructure have been used. The human capital indicator considers health, formal education, informal education and accumulated experience. It embraces a wider range of factors than the variables conventionally used in empirical studies. As to the institutional infrastructure index, it has been constructed on the basis of six institutional sub-indices, comprising voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption. Thus, the index constructed captures a greater wealth of the items commonly covered by the concept of institutions. [ABSTRACT FROM AUTHOR]

Moral institutions, religions and ethics affect the economic development, as for example, trust and honesty are essential requirements for emerging economic activity. Religious production efficiency measure is constructed and used in economic growth regressions for 8 OECD countries. By using panel estimation methods and additionally time-series estimations for each country, more information is gained concerning the country specific growth and religion characteristics. Empirical evidence from the panel data estimations seems to suggest that religious beliefs attain more relevance than religious attendance. Religious production efficiency, containing both belief and activity aspects, was not found statistically significant with panel data or with individiual 8 OECD countries growth model, except for Finland. Significant coefficient for Finland can be explained by referring to Finland's unique religious market properties, as the level of religious beliefs have historically been unusually high in Finland. On the other hand, attendance in religious activities has followed the typical Northern-European decreasing trend. More exact understanding on the links between these concepts are essentially needed to better model the economic consequences of cultural, religious and moral variables. [ABSTRACT FROM AUTHOR]

This study investigates the empirical relationship(s) between macroeconomic instability, public and private capital accumulation and growth in Turkey over the period 1963-1999. Time series econometric techniques, such as cointegration and impulse response analysis, are used. The results of this paper suggest that the chronic and increasing macroeconomic instability of the Turkish economy has seriously affected her capital formation and growth. Furthermore, the Turkish experience indicates that chronic macroeconomic instability seems to be a serious impediment to public investment, especially to its infrastructural component, and shatters, or even reverses, the complementarity between public and private investment in the long run. [ABSTRACT FROM AUTHOR]

This paper reviews the recent stock market developments in Poland and the Czech Republic and provides a case-study insight into the direction of causality between stock market expansion and economic growth. It finds no evidence that the relative failure of the Czech security market affected the country's economy. It also reports that the largest equity issuers in Eastern Europe do not come from industries traditionally considered financially dependent. [ABSTRACT FROM AUTHOR]

In contrast to cross-country studies, the paper investigates the relationships between trade and labour productivity for nine rapidly developing Asian countries in a time-series framework using a vector error-correction model. Independent tests on the long-run and short-run relationship between trade variables of exports and imports and productivity are conducted. The results suggest that trade has an important impact on productivity and output growth in the economy, however it is imports that provide the important 'virtuous' link between trade and output growth. The results indicate that exports and imports have qualitatively different impacts on labour productivity. The long-run result shows that there is no causal effect from exports to labour productivity growth for Hong Kong, Indonesia, Japan, Taiwan and Thailand; thereby suggesting that there is no export-led productivity growth in these countries. However, significant causal effects were found from imports to productivity growth, suggesting import-led productivity growth in India, Indonesia, Malaysia, Philippines, Singapore and Taiwan. In addition, the results indicate that imports tend to have greater positive impact on productivity growth in the long run. [ABSTRACT FROM AUTHOR]

The increasing diversity of average growth rates and income levels across countries has generated a large literature on testing the income convergence hypothesis. Most countries in South-East Asia, particularly five founding ASEAN member countries (ASEAN-5), have experienced substantial economic growth, with the pace of growth having varied substantially across countries. Recent empirical studies have found evidence of several convergence clubs, in which per capita incomes have converged for selected groupings of countries and regions. This paper applies different time series tests of convergence to determine if there is a convergence club for ASEAN-5, as well as ASEAN-5 and the USA. The catching up hypothesis states that the lagging country, with low initial income and productivity levels, will tend to grow more rapidly by copying the technology of the leader country, without having to bear the associated costs of research and development. Given the important effects of technological change on growth, this paper also examines whether ASEAN-5 is catching up technologically with the USA. [ABSTRACT FROM AUTHOR]

This paper examines the effect of 'quality' of the institutional framework on economic development. Our empirical results support the hypothesis that 'good' institutions improve efficiency and accelerate growth. The positive effect of institutional 'quality' is more pronounced with mutually reinforcing support of economic freedom. Our results also indicate that 'good' institutions help developing countries grow faster to achieve conditional convergence. We infer from the results that economic development requires not only physical and human capital formation, but also freedom to choose and institutional support. [ABSTRACT FROM AUTHOR]

It has become popular to advocate tax reduction on the basis of promoting savings, investment and ultimately economic growth. The linkage between the variables is argued by various neoclassical growth models and is further suggested by recent studies which highlight the close association between domestic saving and investment rates. The close association may allow for polices which alter domestic saving levels in order to alter domestic investment levels. This interpretation, however, presumes an endogenous investment response. Equally likely, theoretically, is that the close association is maintained by movements in national savings. The present paper explicitly examines the endogeneity of the Australian saving and investment rates. The results highlight the exogeneity of investment. The results further suggest an endogenous response on the part of Australia's saving rate. The results may limit the potential benefits of these tax changes. [ABSTRACT FROM AUTHOR]

This paper studies cyclic patterns in the Slovene economy with spectral analysis. It examines if the transition in Slovenia was marked by a statistically significant movement of aggregate economic activity, which corresponds to the definition of business cycle proposed by Mitchell and Burns (1946). It finds that in the period 1992–2000 a statistically significant cyclic component is present. The cyclic component oscillates with the frequency of 33.3 months. The results obtained in this paper suggest, that in the observed period two full-length cycles can be identified. [ABSTRACT FROM AUTHOR]

The aim of this paper is to estimate the trend of social welfare for Australia using 1983-1984, 1988-1989 and 1993-1994 Household Expenditure Survey data. The functional form of the Social Welfare Function (SWF) was derived by Sen, Degum, Yitzhaki and Shesinski (all independently). Since the function contains the Gini coefficient as the inequality parameter, it could not be formally disaggregated by subgroups of population. This paper, using a method of subgroup decomposition of the Gini coefficient developed by Podder, attempts to disaggregate the SWF. With this method it is now possible to identify disadvantaged groups by their relative shares in total welfare. In addition the method is used to determine effect of economic growth on specific subgroups, and in turn, on total social welfare. This study is based on the Australian economy. Distribution of relative shares of total social welfare among various regional groups are identified, groups determined by occupational status and groups determined by country of birth. The effect on society's welfare for a percentage change in income of a group and the trend of relative welfare of a specific group are also computed. This information can be used in a variety of social decision making situations, including cost benefit analysis. [ABSTRACT FROM AUTHOR]