Macroeconomic Policies For Stable Growth

by Villanueva, Delano S.

• ISBN13: 9789812818300
• ISBN10: 9812818308
• Format: Hardcover
• Copyright: 2008-09-29
• Publisher: World Scientific Pub Co Inc

Summary

"This volume is a collection of published and unpublished papers that the author has written over the last two decades during part of his tenure at the International Monetary Fund, the South East Asian Central Banks Research and Training Center, and Singapore Management University. The policy-oriented book examines the links between macroeconomic policies and noninflationary, full-employment levels and growth rates of aggregate gross domestic product, with particular focus on the application in emerging markets of the tools of growth theory. Theoretically sound and grounded in practical wisdom, this book is an essential reading for economic, financial and developmental policymakers, professional economists, and undergraduate/graduate students in economics and social sciences."--BOOK JACKET.

Table of Contents

Acknowledgments	p. xi
Introduction and Overview	p. xiii
Strategies for Financial Reforms	p. 1
Financial Liberalization: A Review of Major Issues	p. 3
Theoretical Developments	p. 4
An Overview of the Theory	p. 5
Imperfect Information and Credit Rationing	p. 6
Risk-Sharing and Macroeconomic Stability	p. 8
The Problem of Moral Hazard	p. 11
Policy Strategies	p. 13
Experiences with Different Liberalization Strategies	p. 15
Rapid Interest Rate Liberalization	p. 15
Gradual Liberalization of Interest Rates	p. 18
Summary and Conclusions	p. 20
Appendix 1.A	p. 22
Models of Credit Rationing and Implicit Contracts	p. 22
Stiglitz-Weiss (1981) Model	p. 22
Fried-Howitt (1980) Model	p. 23
Mankiw (1986) Model	p. 27
References	p. 27
Managing Capital Flows	p. 30
Introduction	p. 30
International Private Capital Flows Into South East Asia	p. 31
Why the Surge in Capital Inflows?	p. 34
Liberalizing Capital Flows	p. 35
Long-Term Flows	p. 37
Short-Term Flows	p. 38
Macroeconomic Effects	p. 39
Contagion Effects	p. 42
Policy Responses	p. 44
Intervention	p. 47
Sterilization Through Open Market Operations	p. 49
Sterilization Through Increases in Reserve Requirements	p. 53
Sterilization Through Shifts in Government Deposits	p. 54
Fiscal Consolidation	p. 55
Capital Controls	p. 56
A Proposed Policy Strategy	p. 57
In Open Capital Markets, MAS/HMA or NZ Model?	p. 60
Credit Concentration	p. 61
Connected Lending	p. 61
Summary and Conclusions	p. 62
Appendix 2.A: Basle Core Principles for Effective Banking Supervision	p. 63
Preconditions for Effective Banking Supervision	p. 63
Licensing and Structure	p. 63
Prudential Regulations and Requirements	p. 64
Methods of Ongoing Banking Supervision	p. 65
Information Requirements	p. 66
Formal Powers of Supervisors	p. 66
Cross-Border Banking	p. 66
Appendix 2.B: New Zealand Public Disclosure Framework for Banks	p. 67
Registration of Banks	p. 67
Reserve Bank Action When A Bank's Capital Falls Below Requirements	p. 67
Form of Disclosure	p. 68
Key Information Summary	p. 68
General Disclosure Statement	p. 69
Directors' Attestations and Legal Responsibilities	p. 70
Reserve Bank's Responsibilities	p. 70
References	p. 71
External Debt, Adjustment, and Growth	p. 74
Introduction	p. 74
The Formal Framework	p. 76
Brief Survey of the Literature	p. 76
The Extended Model	p. 78
The Reduced Model	p. 82
Restrictions on External Financing	p. 83
Optimal Growth	p. 84
Application to the Philippines	p. 88
Implications for Fiscal Policy and External Debt Management	p. 91
Summary and Conclusions	p. 92
Stability Analysis	p. 93
Data	p. 95
Definitions	p. 95
Data Sources	p. 96
Sample Period	p. 96
Software Used	p. 96
Optimal Saving in a Learning by Doing Model	p. 96
Introduction	p. 96
The Model	p. 100
The Reduced Model	p. 102
Comparative Dynamics	p. 104
Comments on the Optimal Saving Rate	p. 108
Concluding Remarks	p. 110
References	p. 110
Exports and Economic Development	p. 113
Introduction	p. 113
The Growth Model	p. 116
The Standard vs. Modified Models: An Overview	p. 117
A Two-Sector Modified Model	p. 123
Equilibrium Behavior	p. 125
The Dynamic Effects of Exports on Economic Growth	p. 127
Some Extensions	p. 129
Optimal Saving	p. 130
Summary and Conclusions	p. 131
References	p. 132
Openness, Human Development, and Fiscal Policies	p. 135
Endogenous Growth	p. 137
Reduced Model	p. 140
Stability	p. 141
Equilibrium Capital Intensity and Growth	p. 143
Comparative Dynamics	p. 143
Effects of a Higher Saving Rate	p. 144
Effects of Openness, Human Development Spending, and Technical Change	p. 146
Effects of Fiscal Deficits and Population Growth	p. 148
Optimal Long-Run Growth	p. 148
The Speed of Adjustment Toward Equilibrium	p. 151
Analytical Approach	p. 151
Simulation	p. 152
Empirical Approach	p. 155
Summary and Conclusions	p. 158
Data Used in the Study	p. 159
List of Countries	p. 160
The Data	p. 160
The Endogenous Growth Model in a Ramsey Framework	p. 162
The Model	p. 162
The Reduced Model	p. 164
Comparative Dynamics	p. 165
Optimal Saving Rate	p. 167
The Speed of Adjustment to Equilibrium	p. 168
Conclusion	p. 173
References	p. 174
Social and Political Factors in a Model of Endogenous Economic Growth and Distribution: An Application to the Philippines	p. 176
Introduction	p. 176
The Theoretical Framework	p. 177
The Macro Economy	p. 177
Asset Distribution and Social Extraction	p. 179
Factor Incomes and the Rate of Extraction	p. 180
The Determinants of the Rate of Extraction	p. 181
Politics of Growth and Growth of Politics	p. 184
The Growth Model	p. 186
Calibration of the Model	p. 189
Simulating the Effects of Public Policies	p. 192
Sector-Specific and Institutional Policies	p. 193
Fiscal Policies	p. 196
Sensitivity of Results to Assumption on ¿	p. 198
The Philippine Macroeconomic Experience	p. 199
Wealth Distribution	p. 200
The Rate of Social Extraction	p. 200
Inflation	p. 201
Extractive Activities	p. 202
Distributional Issues	p. 204
Summary and Conclusions	p. 205
Derivation of Optimal Group Allocation Rates	p. 206
References	p. 209
Does Monetary Policy Matter for Long-Run Growth?	p. 211
Introduction	p. 211
The Modified Model	p. 212
The Effects of Disinflation	p. 220
Optimal Monetary Policy and Optimal Long-Run Growth	p. 224
The Speed of Adjustment to Long-Run Equilibrium	p. 227
Summary and Conclusions	p. 230
The Reduced Model and Stability Analysis	p. 231
Regressions	p. 233
References	p. 235
Index	p. 237
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