Capital accumulation and economic growth in a small open economy
In: 4190 The CISCE lectures in growth and development
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In: 4190 The CISCE lectures in growth and development
In: Journal of economic dynamics & control, Band 61, S. 204-221
ISSN: 0165-1889
In: New Zealand economic papers, Band 47, Heft 2, S. 113-139
ISSN: 1943-4863
In: Journal of human capital: JHC, Band 5, Heft 4, S. 418-452
ISSN: 1932-8664
In: Journal of economic dynamics & control, Band 35, Heft 9, S. 1605-1613
ISSN: 0165-1889
In: Economica, Band 78, Heft 309, S. 67-88
ISSN: 1468-0335
This paper discusses the impact of A. W. H. Phillips' seminal contributions to stabilization policy on subsequent developments in that field. We review the policy rules introduced by Phillips and show how these relate to the optimal rules emerging from linear–quadratic optimization problems. The consequences of rational expectations for the design of optimal stabilization policy are discussed. These challenges arose from the role of 'forward‐looking' variables, through issues such as the 'Lucas Critique' and the 'time consistency' of policy. The paper also discusses some of the contemporary aspects of stabilization policy, thereby highlighting the durability of Phillips' contributions.
In: Journal of international affairs, Band 58, Heft 2, S. 129-159
ISSN: 0022-197X
World Affairs Online
In: Journal of economic dynamics & control, Band 26, Heft 9-10, S. 1765-1785
ISSN: 0165-1889
In: Journal of Monetary Economics, Band 45, Heft 1, S. 185-210
This paper discusses some of the recent developments in growth theory, doing so from the perspective of a small open economy. After setting out a basic generic model, we show how it may yield two of the key models that have played a prominent role in the recent literature, the endogenous growth model and the non-scale growth model. We focus initially on the former, emphasizing how the simplest such model leads to an equilibrium in which the economy is always on its balanced growth path. One aspect of the model is the importance of fiscal policy as a determinant of the equilibrium growth rate, an aspect that is discussed in detail. We also show how the endogeneity or otherwise of the labor supply is crucial in determining the equilibrium growth rate and its responsiveness to macroeconomic policy. But transitional dynamics are an important aspect of the growth process and indeed much research has been directed to determining the speed with which the economy converges to its balanced growth path. We discuss alternative ways that such transitional dynamics may be introduced. These include (i) restricted access to the world capital market; (ii) the introduction of government capital , and (iii) the two-sector production model, pioneered by Lucas. In the original analysis, the two capital goods relate to physical and human capital and in the international context these naturally can be identified with traded and nontraded capital, respectively. Criticism of the endogenous growth model has led to the development of the nonscale growth model. This too is characterized by transitional dynamics, which are more flexible than those of the corresponding endogenous growth model. This model is much closer to the neoclassical model; in particular, the long-run growth rate is independent of macroeconomic policy. However, since such models are typically associated with slow convergence speeds, policy can influence the accumulation of capital for extended periods of time, leading to significant long-run level effects. The discussion seeks to emphasize the adaptability of the models to a wide range of issues. A final extension addresses the impact of volatililty on growth. This has been extensively analyzed empirically and a stochastic extension of the endogenous growth model provides a convenient framework within which to interpret this research.
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