This document proposes a new conceptual framework for analyzing the political drivers of economic growth regimes and transitions between them. It focuses on understanding what drives growth acceleration from stagnation to stable growth, and what allows growth to be maintained, where previous research focused more on long-term growth differences. The framework analyzes the "deals space", where ordered deals between political and economic elites that are open to more actors allow for growth acceleration and maintenance, while closed or disordered deals risk growth collapse due to negative feedback over time. The framework generates testable hypotheses about how shifts in the political environment and economic structure influence a country's growth trajectory.
This document discusses economic power within the international political economy. It argues that true economic power stems from efficient control over resources and the ability to manipulate the structures that govern international trade - not just wealth alone. States are identified as having the most economic power as they can influence institutions and policies to their strategic advantage in ways that guide macroeconomic shifts. While multinational corporations possess significant resources, they ultimately lack structural power and long-term strategic positioning within the international political economy.
The document summarizes the key ideas of monetarism. It discusses how monetarism reestablished the quantity theory of money and added expectations to the Phillips curve. One of the main monetarist ideas is that changes in the money supply are the predominant factor influencing money income and inflation. The economy is inherently stable unless disturbed by erratic monetary growth, and there is no long-run tradeoff between unemployment and inflation. Monetarism contributed important and lasting ideas to modern macroeconomics.
- The Asian financial crisis was more complex than predicted by standard currency crisis models and involved collapses in domestic asset markets and widespread bank failures [1].
- To understand the crisis, we must focus on the role of poorly regulated financial intermediaries that engaged in risky lending, fueling asset price bubbles. This excessive risk-taking was enabled by an implicit government guarantee on their liabilities [2].
- The bursting of these bubbles, as falling asset prices revealed the insolvency of overleveraged intermediaries, explains both the severity of the crisis and contagion between economies through financial linkages [3].
An empirical study on the relationship between stock market index and the nat...Alexander Decker
This document discusses a study that investigates the relationship between stock market development and economic growth in Jordan from 2000-2012. It uses various econometric models including unit root tests, Granger causality tests, and cointegration analysis. The results of the Granger causality tests indicate there is unidirectional causality from stock market development to economic growth. The study aims to examine the long-run and short-run dynamics between Jordan's stock market index and real GDP.
This document discusses central bank independence and its relationship to inflation. It provides background on the role of central banks and argues that independence is important to prevent political manipulation that could lead to high inflation. Central bank independence is associated with lower inflation rates. The document examines several theories for why this occurs and discusses inflation targeting as a monetary policy strategy used by independent central banks to maintain price stability over the long run.
Financialization, Rentier Interests, and Central Bank PolicyConor McCabe
Financialization, Rentier Interests, and Central Bank Policy
Gerald Epstein
Department of Economics and Political Economy Research Institute (PERI)
University of Massachusetts, Amherst
December, 2001; this version, June, 2002
This document summarizes the key findings from an analysis of past deleveraging cycles in the US economy in the mid-1970s and early 1990s. Some of the main points include:
- Past deleveraging cycles were actually good periods for stock market performance and saw leadership from consumer discretionary and technology stocks.
- Deleveraging is a lagging phenomenon that typically occurs late in an economic slowdown.
- Housing activity, as measured by building permits, tended to bottom out early in past deleveraging cycles and then rise steadily through the cycle.
- Inflation tended to decline during deleveraging periods, suggesting disinflation may lie ahead.
- Mon
This document discusses economic power within the international political economy. It argues that true economic power stems from efficient control over resources and the ability to manipulate the structures that govern international trade - not just wealth alone. States are identified as having the most economic power as they can influence institutions and policies to their strategic advantage in ways that guide macroeconomic shifts. While multinational corporations possess significant resources, they ultimately lack structural power and long-term strategic positioning within the international political economy.
The document summarizes the key ideas of monetarism. It discusses how monetarism reestablished the quantity theory of money and added expectations to the Phillips curve. One of the main monetarist ideas is that changes in the money supply are the predominant factor influencing money income and inflation. The economy is inherently stable unless disturbed by erratic monetary growth, and there is no long-run tradeoff between unemployment and inflation. Monetarism contributed important and lasting ideas to modern macroeconomics.
- The Asian financial crisis was more complex than predicted by standard currency crisis models and involved collapses in domestic asset markets and widespread bank failures [1].
- To understand the crisis, we must focus on the role of poorly regulated financial intermediaries that engaged in risky lending, fueling asset price bubbles. This excessive risk-taking was enabled by an implicit government guarantee on their liabilities [2].
- The bursting of these bubbles, as falling asset prices revealed the insolvency of overleveraged intermediaries, explains both the severity of the crisis and contagion between economies through financial linkages [3].
An empirical study on the relationship between stock market index and the nat...Alexander Decker
This document discusses a study that investigates the relationship between stock market development and economic growth in Jordan from 2000-2012. It uses various econometric models including unit root tests, Granger causality tests, and cointegration analysis. The results of the Granger causality tests indicate there is unidirectional causality from stock market development to economic growth. The study aims to examine the long-run and short-run dynamics between Jordan's stock market index and real GDP.
This document discusses central bank independence and its relationship to inflation. It provides background on the role of central banks and argues that independence is important to prevent political manipulation that could lead to high inflation. Central bank independence is associated with lower inflation rates. The document examines several theories for why this occurs and discusses inflation targeting as a monetary policy strategy used by independent central banks to maintain price stability over the long run.
Financialization, Rentier Interests, and Central Bank PolicyConor McCabe
Financialization, Rentier Interests, and Central Bank Policy
Gerald Epstein
Department of Economics and Political Economy Research Institute (PERI)
University of Massachusetts, Amherst
December, 2001; this version, June, 2002
This document summarizes the key findings from an analysis of past deleveraging cycles in the US economy in the mid-1970s and early 1990s. Some of the main points include:
- Past deleveraging cycles were actually good periods for stock market performance and saw leadership from consumer discretionary and technology stocks.
- Deleveraging is a lagging phenomenon that typically occurs late in an economic slowdown.
- Housing activity, as measured by building permits, tended to bottom out early in past deleveraging cycles and then rise steadily through the cycle.
- Inflation tended to decline during deleveraging periods, suggesting disinflation may lie ahead.
- Mon
The document discusses the causes, effects, and outcomes of the Great Recession that began in 2007. It explores the role of the housing market, subprime loans, credit default swaps, and monetary policy in causing the crisis. The recession significantly impacted the United States, Europe, and global economies. While government actions sought to address the crisis, more may need to be done to prevent future recessions.
Examine the long run relationship between financial development and economic ...Alexander Decker
This study examines the long-run relationship between financial development and economic growth in India using monthly data from January 1994 to December 2011. The empirical results found two cointegrating equations between the variables. The vector error correction model shows that in the long run, stock market development negatively impacts economic growth, while increases in bank credit positively affect the economy. Money supply was also found to negatively impact economic growth in the long run, while trade openness had no impact. The study suggests that financial sector liberalization and openness policies can promote economic growth by improving market size and maintaining macroeconomic stability.
Monetarism is an economic school of thought that stresses the primary importance of the money supply in determining nominal GDP and price levels. It challenges Keynesian economics by arguing that monetary policy, not fiscal policy, should be used to stabilize the economy. Monetarists believe the central bank should target money supply growth and follow fixed rules, rather than have discretion, as monetary factors are more important than fiscal interventions in impacting economic outcomes.
Developing Trends - Central Banks - The Good the Bad and the UglyNikhil Mohan
This document discusses central banks and their performance. It summarizes that central banks aim to target inflation and maximize output. The US central bank has performed best among developed economies, while Israel's central bank has performed best among emerging markets from 2002-2011. Countries with interest rates lower than what the Taylor Rule prescribes have experienced little inflation cost and stronger growth. Inflation was a concern in early-mid 2011, but growth, or the lack thereof, will be a bigger concern for emerging markets going forward, suggesting interest rate cuts may be needed.
The long run impact of bank credit on economic growth in ethiopia evidence f...Alexander Decker
This document analyzes the long-run impact of bank credit on economic growth in Ethiopia from 1971/72 to 2010/11 using a multivariate cointegration approach. The results support a positive relationship between bank credit and economic growth, with bank credit affecting growth through both higher investment and more efficient resource allocation. Deposit liabilities were also found to positively impact long-run growth. Control variables like human capital, domestic capital, and trade openness positively impacted growth, while inflation and government spending negatively impacted growth. The findings imply policymakers should focus on developing Ethiopia's banking sector to promote domestic investment and long-run economic growth.
The document discusses inflation in India and fiscal tools to control it. It provides definitions of inflation and discusses various causes of inflation including demand-pull inflation and cost-push inflation. It also outlines different types of inflation and discusses the inflation rate in India. The document then examines the role of fiscal policy tools like reducing public expenditure, increasing tax revenues, and increasing the supply of goods and services as ways for the government to control inflation. However, it notes that the scope to significantly reduce public expenditure or withdraw purchasing power through taxation is limited for developing countries. The most effective fiscal policy is focused on increasing incentives for private investment and production to ultimately increase the supply of goods.
This document discusses the concept of "black swans" and economic forecasting. It begins by explaining the origin of the term "black swan" and how Nassim Taleb later used it to describe rare events with disproportionate impacts. It then discusses challenges with economic analysis and forecasting due to lack of data and uncertainties. The rest of the document focuses on analyzing past recessions and economic cycles, challenges with the recent recovery, issues around credit growth and deleveraging, and the importance of considering many interrelated factors when developing economic forecasts. It also describes the machine learning techniques and models used by the company discussed in the document to generate their economic forecasts.
Foreign Direct Investment in the former Soviet Unionrojeymiller
FDI is expected to increase economic growth in the Former Soviet Union (FSU) through mechanisms like productivity gains and technology transfers. The author constructs a model to test if FDI has a greater effect on GDP growth in FSU countries than elsewhere. Independent variables include FDI, secondary education, inflation, trade openness, and initial GDP. Regression results may help understand how to support transitioning economies and attract beneficial FDI.
11.how can behavioural finance help us in better understanding the recent glo...Alexander Decker
This document summarizes how behavioral finance can help explain the recent global financial crisis. It discusses how limits to arbitrage and investor psychology allowed the housing bubble to form and persist in the US, leading to the crisis. Specifically, it describes models of information cascades and limits to arbitrage that show how irrational investor behavior can spread and how arbitrage is risky, preventing prices from quickly correcting. The document concludes behavioral finance provides important insights into the underlying reasons for the crisis by informing how less rational decisions by investors and managers can aggregate into market outcomes like asset bubbles.
Impact of injection and withdrawal of money stock on economic growth in nigeriaAlexander Decker
This document summarizes a study that examines the impact of injecting and withdrawing money stock on economic growth in Nigeria from 1970 to 2008. It uses regression analysis to study the relationship between money supply (M2) and interest rates as indicators of money stock changes, and gross domestic product (GDP) as a measure of economic growth. The study finds that injecting money stock by increasing the money supply tends to reduce interest rates and increase investment, thereby stimulating economic growth. However, excessive money stock increases that are not matched by growth in real output can lead to inflation instead of higher growth.
The document discusses business cycles, providing definitions and explanations of key concepts:
- Business cycles refer to periodic fluctuations in economic activity, alternating between periods of expansion/prosperity and contraction/recession.
- The phases of a business cycle are expansion, peak, contraction/recession, and trough. Cycles vary in duration from 2-10 years.
- Features of business cycles include their periodicity, synchronic impacts across industries, and effects on variables like employment, investment, and prices. Investment and durable goods are most impacted.
The document compares the monetary and Keynesian approaches to economic stability. The monetary (or monetarist) approach is based on the role of money in stabilizing aggregate demand, and believes that limiting government intervention and controlling the money supply are key. The Keynesian approach focuses on the role of government spending in stabilizing aggregate demand, and does not restrict government intervention. It believes fiscal policy tools like tax rates and government spending are most important for achieving economic stability, especially during downturns when suggested solutions include increasing various types of spending.
International Journal of Humanities and Social Science Invention (IJHSSI)inventionjournals
International Journal of Humanities and Social Science Invention (IJHSSI) is an international journal intended for professionals and researchers in all fields of Humanities and Social Science. IJHSSI publishes research articles and reviews within the whole field Humanities and Social Science, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
This document discusses macroeconomic indicators that can be used to compare emerging economies. It defines emerging economies and lists some key characteristics such as undergoing economic reforms and opening markets. The document outlines several important macroeconomic indicators that will be studied, including GDP, unemployment, inflation, interest rates, and their relationships. It presents the objectives of the study as finding countries' economic potential and comparing macroeconomic factors to identify opportunities for investment or business operations.
This document provides an overview of the history and evolution of macroeconomic thought. It discusses classical macroeconomics, the Keynesian revolution in response to the Great Depression, and subsequent challenges to and developments in Keynesian theory including monetarism, rational expectations, and real business cycle theory. Modern macroeconomics incorporates elements of different schools of thought with an emphasis on the role of both aggregate demand and supply factors.
This document discusses financial restructuring in the Organization of Eastern Caribbean States countries. It notes that as economies develop, non-bank financial institutions have begun competing with banks by offering similar retail and wholesale services. This has led to a shift away from bank dominance in financial intermediation to non-banks. The document examines this process of financial restructuring and discusses some associated policy issues regarding the development of financial systems in these countries.
Credibility Of Optimal Monetary Delegationrafaeldepp
This document summarizes an academic article from The American Economic Review about the credibility of optimal monetary policy delegation. The key points are:
1) There is a dynamic inconsistency problem with discretionary monetary policy, as governments have an incentive to create surprise inflation.
2) Some theories propose delegating monetary policy to an independent central bank to overcome this problem. However, the document argues delegation does not fully resolve the issue if it can be changed without costs.
3) The document presents a model where monetary delegation is a strategic choice. It finds that "reappointment costs" for changing delegation improve outcomes but do not fully resolve the dynamic inconsistency. Optimal policy is also less credible with these costs.
This document summarizes a discussion paper on the relationship between sustained economic growth and financial systems. It begins by noting that traditional growth theory does not consider the role of financing, but that financial systems play important roles in channeling savings to investment, allowing risk sharing, and producing information to allocate capital. It then reviews literature on how financial systems can promote growth through producing information, allocating capital to high-return projects, and facilitating risk sharing. The paper discusses empirical evidence and challenges in analyzing the complex relationships between financial development, structure, and economic growth.
Does Economic Growth Affect Capital Market Development In Nigeria? 1985 – 2016AJHSSR Journal
The goal of this paper is to assess the impact of economic growth affects capital market
development in Nigeria using annualised data from 1986-2016. We employed that Johansen cointegration
technique to determine if our variables are cointegrated. The error correction model (ECM) was employed to
estimate our dynamic short and long-run model. Various diagnostic tests were also conducted to confirm the
validity of our results. The results indicate that there is a long-run relationship between economic growth and
capital market development. The baseline estimator further showed that economic growth has significant
positive influence on capital market development. We also found that inflation has significant negative impact
on the capital market while money supply was found to have insignificant effect on the dependent variable. The
error correction term showed evidence of slow speed of adjustment toward long-run equilibrium, with deviation
from equilibrium corrected at the speed of 2.3 percent on annual basis. We conclude that economic growth
indeed drives capital market development in Nigeria. And were recommend that policies aimed at facilitating
economic activities should be pursued by the monetary authorities, the government and policymakers to further
enhance the development of Nigerian capital market
MYANMAR'S STALLED TRANSITION
https://www.crisisgroup.org/asia/south-east-asia/myanmar/296-long-haul-ahead-myanmars-rohingya-refugee-crisis
Myanmar's State Counsellor and Foreign Minister Aung San Suu Kyi looks on during the 9th ASEAN UN Summit in Manila, Philippines, 13 November 2017. REUTERS/Linus Escandor Ii/Pool
BRIEFING 151 / ASIA 28 AUGUST 2018
Myanmar’s Stalled Transition
Aung San Suu Kyi’s government appears stuck amid international condemnation of the Rohingya's mass displacement and domestic unease about the economy. To nudge Myanmar’s post-junta transition forward, the UN should combine engagement with pressure for accountability for crimes against humanity and eventual refugee return.
MYANMAR'S STALLED TRANSITION
https://www.crisisgroup.org/asia/south-east-asia/myanmar/296-long-haul-ahead-myanmars-rohingya-refugee-crisis
Myanmar's State Counsellor and Foreign Minister Aung San Suu Kyi looks on during the 9th ASEAN UN Summit in Manila, Philippines, 13 November 2017. REUTERS/Linus Escandor Ii/Pool
BRIEFING 151 / ASIA 28 AUGUST 2018
Myanmar’s Stalled Transition
Aung San Suu Kyi’s government appears stuck amid international condemnation of the Rohingya's mass displacement and domestic unease about the economy. To nudge Myanmar’s post-junta transition forward, the UN should combine engagement with pressure for accountability for crimes against humanity and eventual refugee return.
Can aid bureaucracies think politically? The administrative challenges of pol...Dr Lendy Spires
This document summarizes a paper that examines the challenges of institutionalizing political economy analysis (PEA) within aid agencies. It focuses on the experiences of DFID and the World Bank in implementing PEA frameworks in Bangladesh, Ghana, and Uganda. While both agencies promote PEA as a way to improve aid effectiveness, the study finds that PEA has not been fully integrated into programming, management practices, or professional norms within the agencies. PEA remains confined mainly to governance specialists and has not disseminated more broadly. The future of PEA depends more on organizational change within agencies than on any particular analytical framework.
Politics, informality and clientelism - exploring a pro-poor urban politicsDr Lendy Spires
This document discusses clientelism in urban politics in the global south and how organized groups of urban poor have sought to transform clientelist relationships. It begins by providing context on urban poverty, politics, and the prevalence of informal settlements. It then discusses definitions of clientelism and perspectives on it, noting it is typically characterized by an unequal exchange between political elites and urban poor communities for resources. The document explores four goals of organized urban poor groups: negotiating bureaucratic changes; managing conflict; mitigating vertical political relations; and transforming resource-based approaches. It argues these ultimately aim for greater legitimacy of the urban poor and increased political accountability.
The document discusses the causes, effects, and outcomes of the Great Recession that began in 2007. It explores the role of the housing market, subprime loans, credit default swaps, and monetary policy in causing the crisis. The recession significantly impacted the United States, Europe, and global economies. While government actions sought to address the crisis, more may need to be done to prevent future recessions.
Examine the long run relationship between financial development and economic ...Alexander Decker
This study examines the long-run relationship between financial development and economic growth in India using monthly data from January 1994 to December 2011. The empirical results found two cointegrating equations between the variables. The vector error correction model shows that in the long run, stock market development negatively impacts economic growth, while increases in bank credit positively affect the economy. Money supply was also found to negatively impact economic growth in the long run, while trade openness had no impact. The study suggests that financial sector liberalization and openness policies can promote economic growth by improving market size and maintaining macroeconomic stability.
Monetarism is an economic school of thought that stresses the primary importance of the money supply in determining nominal GDP and price levels. It challenges Keynesian economics by arguing that monetary policy, not fiscal policy, should be used to stabilize the economy. Monetarists believe the central bank should target money supply growth and follow fixed rules, rather than have discretion, as monetary factors are more important than fiscal interventions in impacting economic outcomes.
Developing Trends - Central Banks - The Good the Bad and the UglyNikhil Mohan
This document discusses central banks and their performance. It summarizes that central banks aim to target inflation and maximize output. The US central bank has performed best among developed economies, while Israel's central bank has performed best among emerging markets from 2002-2011. Countries with interest rates lower than what the Taylor Rule prescribes have experienced little inflation cost and stronger growth. Inflation was a concern in early-mid 2011, but growth, or the lack thereof, will be a bigger concern for emerging markets going forward, suggesting interest rate cuts may be needed.
The long run impact of bank credit on economic growth in ethiopia evidence f...Alexander Decker
This document analyzes the long-run impact of bank credit on economic growth in Ethiopia from 1971/72 to 2010/11 using a multivariate cointegration approach. The results support a positive relationship between bank credit and economic growth, with bank credit affecting growth through both higher investment and more efficient resource allocation. Deposit liabilities were also found to positively impact long-run growth. Control variables like human capital, domestic capital, and trade openness positively impacted growth, while inflation and government spending negatively impacted growth. The findings imply policymakers should focus on developing Ethiopia's banking sector to promote domestic investment and long-run economic growth.
The document discusses inflation in India and fiscal tools to control it. It provides definitions of inflation and discusses various causes of inflation including demand-pull inflation and cost-push inflation. It also outlines different types of inflation and discusses the inflation rate in India. The document then examines the role of fiscal policy tools like reducing public expenditure, increasing tax revenues, and increasing the supply of goods and services as ways for the government to control inflation. However, it notes that the scope to significantly reduce public expenditure or withdraw purchasing power through taxation is limited for developing countries. The most effective fiscal policy is focused on increasing incentives for private investment and production to ultimately increase the supply of goods.
This document discusses the concept of "black swans" and economic forecasting. It begins by explaining the origin of the term "black swan" and how Nassim Taleb later used it to describe rare events with disproportionate impacts. It then discusses challenges with economic analysis and forecasting due to lack of data and uncertainties. The rest of the document focuses on analyzing past recessions and economic cycles, challenges with the recent recovery, issues around credit growth and deleveraging, and the importance of considering many interrelated factors when developing economic forecasts. It also describes the machine learning techniques and models used by the company discussed in the document to generate their economic forecasts.
Foreign Direct Investment in the former Soviet Unionrojeymiller
FDI is expected to increase economic growth in the Former Soviet Union (FSU) through mechanisms like productivity gains and technology transfers. The author constructs a model to test if FDI has a greater effect on GDP growth in FSU countries than elsewhere. Independent variables include FDI, secondary education, inflation, trade openness, and initial GDP. Regression results may help understand how to support transitioning economies and attract beneficial FDI.
11.how can behavioural finance help us in better understanding the recent glo...Alexander Decker
This document summarizes how behavioral finance can help explain the recent global financial crisis. It discusses how limits to arbitrage and investor psychology allowed the housing bubble to form and persist in the US, leading to the crisis. Specifically, it describes models of information cascades and limits to arbitrage that show how irrational investor behavior can spread and how arbitrage is risky, preventing prices from quickly correcting. The document concludes behavioral finance provides important insights into the underlying reasons for the crisis by informing how less rational decisions by investors and managers can aggregate into market outcomes like asset bubbles.
Impact of injection and withdrawal of money stock on economic growth in nigeriaAlexander Decker
This document summarizes a study that examines the impact of injecting and withdrawing money stock on economic growth in Nigeria from 1970 to 2008. It uses regression analysis to study the relationship between money supply (M2) and interest rates as indicators of money stock changes, and gross domestic product (GDP) as a measure of economic growth. The study finds that injecting money stock by increasing the money supply tends to reduce interest rates and increase investment, thereby stimulating economic growth. However, excessive money stock increases that are not matched by growth in real output can lead to inflation instead of higher growth.
The document discusses business cycles, providing definitions and explanations of key concepts:
- Business cycles refer to periodic fluctuations in economic activity, alternating between periods of expansion/prosperity and contraction/recession.
- The phases of a business cycle are expansion, peak, contraction/recession, and trough. Cycles vary in duration from 2-10 years.
- Features of business cycles include their periodicity, synchronic impacts across industries, and effects on variables like employment, investment, and prices. Investment and durable goods are most impacted.
The document compares the monetary and Keynesian approaches to economic stability. The monetary (or monetarist) approach is based on the role of money in stabilizing aggregate demand, and believes that limiting government intervention and controlling the money supply are key. The Keynesian approach focuses on the role of government spending in stabilizing aggregate demand, and does not restrict government intervention. It believes fiscal policy tools like tax rates and government spending are most important for achieving economic stability, especially during downturns when suggested solutions include increasing various types of spending.
International Journal of Humanities and Social Science Invention (IJHSSI)inventionjournals
International Journal of Humanities and Social Science Invention (IJHSSI) is an international journal intended for professionals and researchers in all fields of Humanities and Social Science. IJHSSI publishes research articles and reviews within the whole field Humanities and Social Science, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
This document discusses macroeconomic indicators that can be used to compare emerging economies. It defines emerging economies and lists some key characteristics such as undergoing economic reforms and opening markets. The document outlines several important macroeconomic indicators that will be studied, including GDP, unemployment, inflation, interest rates, and their relationships. It presents the objectives of the study as finding countries' economic potential and comparing macroeconomic factors to identify opportunities for investment or business operations.
This document provides an overview of the history and evolution of macroeconomic thought. It discusses classical macroeconomics, the Keynesian revolution in response to the Great Depression, and subsequent challenges to and developments in Keynesian theory including monetarism, rational expectations, and real business cycle theory. Modern macroeconomics incorporates elements of different schools of thought with an emphasis on the role of both aggregate demand and supply factors.
This document discusses financial restructuring in the Organization of Eastern Caribbean States countries. It notes that as economies develop, non-bank financial institutions have begun competing with banks by offering similar retail and wholesale services. This has led to a shift away from bank dominance in financial intermediation to non-banks. The document examines this process of financial restructuring and discusses some associated policy issues regarding the development of financial systems in these countries.
Credibility Of Optimal Monetary Delegationrafaeldepp
This document summarizes an academic article from The American Economic Review about the credibility of optimal monetary policy delegation. The key points are:
1) There is a dynamic inconsistency problem with discretionary monetary policy, as governments have an incentive to create surprise inflation.
2) Some theories propose delegating monetary policy to an independent central bank to overcome this problem. However, the document argues delegation does not fully resolve the issue if it can be changed without costs.
3) The document presents a model where monetary delegation is a strategic choice. It finds that "reappointment costs" for changing delegation improve outcomes but do not fully resolve the dynamic inconsistency. Optimal policy is also less credible with these costs.
This document summarizes a discussion paper on the relationship between sustained economic growth and financial systems. It begins by noting that traditional growth theory does not consider the role of financing, but that financial systems play important roles in channeling savings to investment, allowing risk sharing, and producing information to allocate capital. It then reviews literature on how financial systems can promote growth through producing information, allocating capital to high-return projects, and facilitating risk sharing. The paper discusses empirical evidence and challenges in analyzing the complex relationships between financial development, structure, and economic growth.
Does Economic Growth Affect Capital Market Development In Nigeria? 1985 – 2016AJHSSR Journal
The goal of this paper is to assess the impact of economic growth affects capital market
development in Nigeria using annualised data from 1986-2016. We employed that Johansen cointegration
technique to determine if our variables are cointegrated. The error correction model (ECM) was employed to
estimate our dynamic short and long-run model. Various diagnostic tests were also conducted to confirm the
validity of our results. The results indicate that there is a long-run relationship between economic growth and
capital market development. The baseline estimator further showed that economic growth has significant
positive influence on capital market development. We also found that inflation has significant negative impact
on the capital market while money supply was found to have insignificant effect on the dependent variable. The
error correction term showed evidence of slow speed of adjustment toward long-run equilibrium, with deviation
from equilibrium corrected at the speed of 2.3 percent on annual basis. We conclude that economic growth
indeed drives capital market development in Nigeria. And were recommend that policies aimed at facilitating
economic activities should be pursued by the monetary authorities, the government and policymakers to further
enhance the development of Nigerian capital market
MYANMAR'S STALLED TRANSITION
https://www.crisisgroup.org/asia/south-east-asia/myanmar/296-long-haul-ahead-myanmars-rohingya-refugee-crisis
Myanmar's State Counsellor and Foreign Minister Aung San Suu Kyi looks on during the 9th ASEAN UN Summit in Manila, Philippines, 13 November 2017. REUTERS/Linus Escandor Ii/Pool
BRIEFING 151 / ASIA 28 AUGUST 2018
Myanmar’s Stalled Transition
Aung San Suu Kyi’s government appears stuck amid international condemnation of the Rohingya's mass displacement and domestic unease about the economy. To nudge Myanmar’s post-junta transition forward, the UN should combine engagement with pressure for accountability for crimes against humanity and eventual refugee return.
MYANMAR'S STALLED TRANSITION
https://www.crisisgroup.org/asia/south-east-asia/myanmar/296-long-haul-ahead-myanmars-rohingya-refugee-crisis
Myanmar's State Counsellor and Foreign Minister Aung San Suu Kyi looks on during the 9th ASEAN UN Summit in Manila, Philippines, 13 November 2017. REUTERS/Linus Escandor Ii/Pool
BRIEFING 151 / ASIA 28 AUGUST 2018
Myanmar’s Stalled Transition
Aung San Suu Kyi’s government appears stuck amid international condemnation of the Rohingya's mass displacement and domestic unease about the economy. To nudge Myanmar’s post-junta transition forward, the UN should combine engagement with pressure for accountability for crimes against humanity and eventual refugee return.
Can aid bureaucracies think politically? The administrative challenges of pol...Dr Lendy Spires
This document summarizes a paper that examines the challenges of institutionalizing political economy analysis (PEA) within aid agencies. It focuses on the experiences of DFID and the World Bank in implementing PEA frameworks in Bangladesh, Ghana, and Uganda. While both agencies promote PEA as a way to improve aid effectiveness, the study finds that PEA has not been fully integrated into programming, management practices, or professional norms within the agencies. PEA remains confined mainly to governance specialists and has not disseminated more broadly. The future of PEA depends more on organizational change within agencies than on any particular analytical framework.
Politics, informality and clientelism - exploring a pro-poor urban politicsDr Lendy Spires
This document discusses clientelism in urban politics in the global south and how organized groups of urban poor have sought to transform clientelist relationships. It begins by providing context on urban poverty, politics, and the prevalence of informal settlements. It then discusses definitions of clientelism and perspectives on it, noting it is typically characterized by an unequal exchange between political elites and urban poor communities for resources. The document explores four goals of organized urban poor groups: negotiating bureaucratic changes; managing conflict; mitigating vertical political relations; and transforming resource-based approaches. It argues these ultimately aim for greater legitimacy of the urban poor and increased political accountability.
Politics and Power in International Development - The potential role of Political Economy Analysis
Geert Laporte, Deputy Director, ECDPM
VIDC, Vienna, 30 January 2014
Donors, Development Agencies and the use of Political Economic Analysis: Gett...Dr Lendy Spires
This document discusses the emergence and evolution of Political Economic Analysis (PEA) tools used by development agencies. It outlines how agencies have historically conducted informal political analyses but are now more systematically using PEA approaches. The good governance agenda of the 1990s influenced early PEAs, which examined politics through the lens of increasing accountability, transparency and rules-based institutions. However, PEA faces limitations due to agencies' political constraints and the difficulty of engaging fully with the politics of the contexts in which they work. More research is still needed on the impact of PEA on development strategies and outcomes.
Rethink the politics of development in Africa? how the political settlement s...Dr Lendy Spires
This document analyzes how the distribution of political power within ruling coalitions in Ghana shaped the allocation of resources to the education sector from 1993 to 2008. It finds that under both the NDC and NPP governments, regions with more powerful factions within the ruling coalition received more education spending per capita compared to need. A political settlements approach focusing on how power is distributed within ruling coalitions provides insights into how politics influences development outcomes in Africa.
The document discusses maps of Canada and Ireland as well as a house in Caherelly East, Limerick in southern Ireland. It also lists the top ten Irish myths and legends and specifically mentions Cu Chulainn. The document asks if there are any questions.
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Arrangements by which politically connected firms receive economic favors are a common feature around the world, but little is known of the form or effects of influence in business-government relationships. We argue that influence not only brings significant privileges for selected firms, but requires firms to relinquish certain control rights in exchange for subsidies and protection. We show that, under these conditions, political influence can actually harm firm performance. Enterprise surveys from approximately 8,000 firms in 40 developing countries indicate that influential firms benefit from lower administrative and regulatory barriers (including bribe taxes), greater pricing power, and easier access to credit. But these firms also provide politically valuable benefits to incumbents through bloated payrolls and greater tax payments. These firms are also less likely to invest and innovate, and suffer from lower productivity than their non-influential counterparts. Our results highlight a potential channel by which cronyism leads to persistent underdevelopment.
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Similar to Researching the Political Economy Determinants of Economic Growth a New Conceptual and Methodological Approach (20)
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Researching the Political Economy Determinants of Economic Growth a New Conceptual and Methodological Approach
1. Researching the political economy
determinants of economic growth:
A new conceptual and
methodological approach
www.effective-states.org
THE APPROACH:
• Moves beyond a focus on ‘what’ policies and institutions are conducive to inclusive growth, and
towards analysis of ‘how’ political processes shape the emergence and maintenance of these policies
and institutions.
• Provides a new framework for analysing the political drivers shaping transitions between economic
growth regimes. For the first time, this separates out analysis of the political drivers of growth
acceleration from those of growth maintenance.
• Enables exploration of the reasons why growth both accelerates from stagnation/crisis to stable/
miracle growth, and may decelerate/collapse at any stage of stable/miracle growth.
• Facilitates investigations into why some countries persistently remain in miracle/stable growth
regimes, while others suffer growth collapses.
Understanding significant differences in growth trajectories and living standards across countries is one
of the most critical endeavours of development research. Long-run growth averages within countries
often mask distinct periods of growth success and growth failure. Massive changes in economic growth
are common in developing countries, with most having experienced distinct episodes of growth
acceleration, deceleration and/or collapse, leading to staggering income gains and losses over relatively
short periods (Pritchett et al., 2014).
ESID Briefing No. 10 (Research Framing Paper No. 4)
2. The large existing literature on the determinants of economic
growth has traditionally focused on understanding its proximate
determinants and, in particular, the role of human and physical
capital accumulation, technological change and productivity growth,
with an increasing interest in the role of institutions. A very recent
literature now recognises the political determinants of the character
of such institutions. This literature has attempted to understand why,
in certain political contexts, growth-enhancing institutions emerge,
and why we see the persistence of growth-impeding institutions
in many developing countries for long periods of time (Acemoglu,
Johnson and Robinson, 2005).
The new approach presented here contributes to the literature on
the political determinants of economic growth in two significant
ways. Firstly, it seeks to generate understanding about the political
drivers of the frequent shifts in growth rates that developing
countries witness over time. (This differs from the focus of much
of the existing literature on the empirics of growth, which looks at
differences in long-run growth rates across countries.) Secondly, the
conceptual framework facilitates the testing of a series of hypotheses
which emerge from the wider literature on the politics of growth.
Much of the previous literature has concentrated on countries which
have experienced persistent ‘miracle growth’. The hypotheses tested
through this approach focus on understanding the political drivers
behind the transitions between growth regimes (Kar et al., 2013a, b)
– that is, both countries which make the move from stagnant/crisis
growth to miracle growth and countries which make the transition
from negative growth to stable growth.
UNDERSTANDING GROWTH REGIMES
Sen (2013) characterises the different phases of growth or growth
regimes that developing countries may experience at different times
in the following terms (also see Figure 1):
Growth Regime 1: Growth Crisis – negative growth rates.
Growth Regime 2: Growth Stagnation – near zero growth rates.
Growth Regime 3: Stable Growth – moderately positive growth rates.
Growth Regime 4: Miracle Growth – high growth rates (7 percent or
over per annum).
Figure 1 makes clear that a complete characterisation of the growth
process in any particular country requires an understanding of two
groups of factors: firstly, those that lead to growth acceleration
(that is, the transition from stagnation or crisis to stable growth or
miracle growth); and, secondly, those that lead to the avoidance of
growth collapses and the maintenance of positive growth (that is,
the ability of the country to stay in stable growth or miracle growth
in consecutive periods).
THE FRAMEWORK
The conceptual framework we use to explain transitions between
growth regimes is based on Sen (2013) and Pritchett and Werker
(2013). It addresses two core questions:
a) What are the institutional and political determinants of growth
accelerations?
b) What are the institutional and political determinants of growth
maintenance?
In our framework, the explanation of growth acceleration is the
emergence of repeated personalised relationships between political
and economic elites, which we call ‘deals’. We define a deal as:
‘a specific action between two (or more) entities in which actions
are not the result of the impersonal application of a rule, but
rather of characteristics or sanctions of specific individuals which
do not spillover with any precedential value to any other future
transaction between other individuals’ (Pritchett and Werker,
2013: 45).
An ‘ordered deal’ is a deal that is honoured, once negotiated between
investors and state officials. A ‘‘disordered deal’ between investors
and the political elite is where there is no certainty that the deal will
be delivered. Economic growth is likely to accelerate when there is
a movement in the deals space from disordered to ordered deals.
What explains the ability of the economy to stay in a positive
growth process and for growth not to slow down or collapse? To
understand this, we define ‘open deals’ as deals that are widely
available to all investors, large or small, and not confined to an elite
or a small group of favoured investors (Pritchett and Werker, 2013).
In contrast, ‘closed deals’ are offered by the political elite only to
a small group of investors. The move from growth acceleration to
growth maintenance would depend on the movement in the deals
space from closed ordered deals to open ordered deals.
An ordered deals environment, even if closed, may be able to sustain
growth for a considerable period. But for growth to be sustained
over the long run, the deals space must – while maintaining order
– also become more open. This is because openness in the deals
space drives economic competition and facilitates the entry of new
firms. This leads to structural transformation, as countries produce
more complex products and as resources shift from low to high
Researching the political economy determinants of economic growth
Growth
Acceleration
Growth
Collapse
Miracle Growth
Stagnation
Stable Growth
Crisis
Miracle Growth
Stagnation
Stable Growth
Crisis
Miracle Growth
Stagnation
Stable Growth
Crisis
TIME t-1 t+1t
Figure 1. Transitions between different growth regimes
Source: Sen (2013)
Closed deals Open deals
Kickstarting
growth
Disordered
deals
Only those
with political
connections
can make
deals, and
even they
cannot be
certain that
officials will
deliver.
Anyone can
make a deal,
but no-one is
certain that
officials will
deliver.
Ordered deals Only those
with political
connections
can make
deals, but
they can be
confident that
officials will
deliver.
Anyone can
make
a deal, and
they can be
certain that
officials will
deliver.
Maintaining growth
Figure 2. The deals space
Source: Pritchett and Werker (2013)
3. productivity sectors and firms. Figure 2 sets out the deals space in a
2x2 matrix and shows how it relates to different phases of growth.
A shift from disordered to ordered deals is associated with growth
acceleration, and a shift from closed ordered to open ordered deals
is associated with growth maintenance.
However, there is nothing pre-ordained in the evolution of institutions
to suggest that a move from a closed ordered deals environment, or a
disordered deals environment, to an open ordered deals environment
is linear. As economic growth originates in a country, two feedback
loops occur from the growth process to the deals space. These
feedback loops can be either positive or negative; in other words,
whether with further economic growth the deals space may turn
from being open ordered to being closed ordered, or disordered.
The first of these feedback loops is economic in nature, and
would depend on the ‘rents space’, or the structure of economic
opportunities in the economy. Figure 3 outlines the rents space in
a 2x2 matrix. This categorises the structure of the economy into
two dimensions, in terms of whether the sectors in the economy
are: in exporting and/or import-competing sectors, or unaffected by
international trade; and characterised by high rents (that is, excess
profits), or competitive.
We call the export-oriented high rent sectors ‘rentiers’ (the upper left
cell), and the competitive tradeable sectors ‘magicians’ (the upper
right cell). We call the monopolistic or oligopolistic domestically
oriented or non-tradeable sectors ‘powerbrokers’ (the lower left
cell), and the competitive domestically oriented sectors ‘workhorses’
(the lower right cell). Rentiers are more likely to be natural resource-
exporting sectors; magicians are likely to be export-oriented
manufacturing sectors. Powerbrokers are likely to be in real estate,
construction, infrastructure, utilities and telecommunications, while
workhorses are likely to be smallholder agriculturists and in the
informal manufacturing and services sectors.
We would expect firms in the ‘rentier’ and ‘powerbroker’ sectors
to be more likely to push for closed than open deals; they would
lose out in an open deals environment, in which rents dissipate
with the entry of new firms, or from more open and transparent
regulatory institutions. Since the state plays a large role in allocating
licences and controlling the entry of new firms in these sectors, these
firms are likely to develop close, personalised relationships with the
political elite, to capture the process of licence allocation or to
create artificial barriers to entry.
On the other hand, firms in the ‘magician’ and ‘workhorse’ sectors
are more likely to push for open than closed deals, for three reasons.
First, these sectors are the most dynamic, and are where ‘creative
destruction’ is most likely to occur, and firms in these sectors would
benefit the most from an open deals environment. Secondly, given
the inherent contestability of these sectors and the large number of
economic actors, a closed deals space that excludes many of these
actors is not likely to find political traction. Finally, these two sectors
depend on an efficient powerbroker sector for cheap and high quality
inputs to their production process, such as well functioning roads and
reliable electricity provision, and would benefit from the competitive
pressures on powerbrokers that an open deals environment would
bring.
Therefore, if the growth acceleration episode is biased towards the
rentier and powerbroker sectors (say, due to a commodity price boom,
or the high growth of non-tradeable sectors, such as infrastructure
and real estate), the economic feedback loop through the rents
space could have a negative effect on the deals environment, making
it closed. On the other hand, a growth acceleration episode biased
towards the magician and workhorse sectors is more likely to lead to
further opening up of the deals space.
The second of the feedback loops would be mostly political in
nature, and would depend on how influential groups – such as
civil society, the judiciary, the middle class, and the media – view
the growth process, as well as how non-elites mobilise themselves
against elements of the growth process that they see as politically
illegitimate. Particularly in countries with strong civil society presence
and electoral politics, the political feedback loop can be negative if
the deals environment underpinning the growth episode is seen as
exclusionary, or if the nature of economic growth is highly predatory.
The political feedback loop can lead to changes in the distribution
of power, as groups such as civil society, the middle class, and
those excluded from the growth process begin to gain de facto
political power, with greater political mobilisation and pushback
from accountability institutions such as the judiciary and the media.
Therefore, while a shift from a disordered deals environment to a
closed ordered deals environment is often necessary for growth to
accelerate, the political feedback effect may turn negative if the
deals space remains closed for too long.
If the positive growth episode is underpinned by closed ordered deals
that do not become open over time, both economic and political
feedback loops are likely to turn negative and the closed ordered
deals environment may become increasingly disordered, ending
the positive growth episode. On the other hand, economic and
political feedback loops can be positive if the deals space becomes
increasingly open and the magician and workhorse sectors become
increasingly important in the growth process, leading to structural
transformation, as new firms, products and industries emerge. In
this case, the positive growth episode will carry on, and sustained
economic growth will result.
OUR HYPOTHESES
This framework enables us to test four key hypotheses about the
political determinants of economic growth across different growth
phases:
1. The likelihood of growth acceleration is a function of the move
from disordered to ordered deals.
2. The likelihood of growth being maintained, once initiated, is a
function of the move from closed to open ordered deals.
3. The commitment of elites to movements in the deals space
from disordered to ordered deals, from closed to open deals,
and from deals to rules, is a function of the nature of rents in
the existing product space. If elites are mostly based in ‘rentier’
and ‘powerbroker’ sectors, it is less likely that elites will have
an incentive to move from closed to open deals, or to enforce
rules. The higher the importance of ‘magician’ and ‘workhorse’
sectors, the more likely the emergence of open ordered deals.
4. Negative political feedback loops may occur if deals remain
closed for too long, and are seen as politically illegitimate by non-
elites. In such a case, positive economic growth may end if there
is a shift back from closed ordered deals to disordered deals.
www.effective-states.org
High rent Competitive
Export-oriented Rentiers
Natural resource
exporters.
Magicians
Manufacturing and
service exporters,
other agricultural
exporters.
Domestic market Powerbrokers
Legislative
monopolies or
oligopolies, natural
monopolies or
oligopolies.
Workhorses
Traders, retailers,
subsistence farmers,
the informal sector.
Figure 3. The rents space
Source: Pritchett and Werker (2013)
4. FURTHER READING
• Acemoglu, D., Johnson, S. and Robinson, J. (2005).
‘Institutions as the fundamental cause of long-run growth’,
in P. Aghion and S. Durlauf (eds.), Handbook of Economic
Growth (Amsterdam: North-Holland).
• Kar, S., Pritchett, L., Raihan, S. and Sen, K. (2013a). The
Dynamics of Economic Growth: A Visual Handbook of
Growth Rates, Regimes, Transition and Volatility, available at
www.effective-states.org.
• Kar, S., Pritchett, L., Raihan, S. and Sen, K. (2013b). ‘Looking
for a break: Identifying transitions in growth regimes’, Journal
of Macroeconomics 38(B), 151-166.
• Kelsall, T., and Seiha, H. (2014). ‘The political settlement and
economic growth in Cambodia’, ESID Working Paper No.37,
www.effective-states.org.
• Pritchett, L. and Werker, E. (2013). ‘Developing the guts of
GUT (Grand Unified Theory): Elite commitment and inclusive
growth’, ESID Working Paper No. 16, www.effective-states.
org.
• Pritchett, L., Sen, K., Kar, S. and Raihan, S. (2014).
‘Trillions gained and lost: Estimating the magnitude of
growth episodes’, CID Working Paper No. 279, Center for
International Development, Harvard University.
• Said, J., and Singini, K. (2014). ‘The political economy
determinants of economic growth in Malawi’, ESID Working
Paper No. 40, www.effective-states.org.
• Sen, K. (2013). ‘The political dynamics of economic growth’,
World Development, 47, 71-86.
• Sen, K. (2014). ‘Inclusive growth: When may we expect it?
And when may we not?’ Asian Development Review, 31(1),
136-162.
ABOUT THIS BRIEFING
This briefing is part of a series of ESID framing papers outlining
new conceptual and methodological approaches for researching
the politics of development. The aim is to operationalise ESID’s
political settlements approach in specific domains – in this case
economic growth – and provide a framework for doing so.
This document is an output from a project funded by the UK Aid from the UK Department for International Development (DFID) for the benefit of developing countries.
However, the views expressed and information contained in it are not necessarily those of or endorsed by DFID, which can accept no responsibility for such views or
information or for any reliance placed on them.
www.effective-states.org
The Effective States and Inclusive Development Research Centre
(ESID) is an international partnership of research and policy institutes led
from the Institute for Development Policy and Management (IDPM) and
Brooks World Poverty Institute (BWPI) at the University of Manchester.
ESID is funded by the UK Department for International Development
(DFID).
ESID researchers are based in Bangladesh, Cambodia, Ghana, India,
Malawi, Peru, Rwanda, South Africa, Uganda, UK, USA, Zambia and
elsewhere.
ESID is led by David Hulme, Chief Executive Officer; Samuel Hickey and
Kunal Sen are Research Directors; Julia Brunt is the Programme Manager;
and Pablo Yanguas is Research Associate.
DFID funds four Research Programme Consortia (RPCs) on governance
and development, of which ESID in one. The others are the International
Centre for Tax and Development (ICTD) at IDS, the Justice and Security
Research Programme (JSRP) at LSE and the Secure Livelihoods Research
Consortium (SLRC) at ODI.
Effective States and Inclusive Development Research Centre
School of Environment, Education and Development
The University of Manchester
Oxford Road
Manchester
M13 9PL
UK
email: esid@manchester.ac.uk
Applying the framework
We are testing these hypotheses through qualitative country case
studies as well as quantitative cross-country econometric analysis.
Our country case studies are Bangladesh, Cambodia (Kelsall and
Seiha, 2014), Ghana, India, Liberia, Malawi (Said and Singini, 2014),
Malaysia, Rwanda, Thailand and Uganda. Bangladesh, Ghana and
Rwanda are in incipient growth acceleration, India is in growth
stagnation, Malawi and Liberia are in recurrent growth collapses, and
Malaysia and Thailand are in mature growth maintenance.
WHAT DOES THIS MEAN FOR RESEARCH
ON THE POLITICS OF DEVELOPMENT?
• The large existing literature on the determinants of economic
growth has focused on ‘what’ policies and institutions are
conducive to growth and, particularly, inclusive growth. We have
limited understanding about ‘how’ political processes shape the
emergence and maintenance of these policies and institutions.
• Our conceptual approach enables researchers to fill this gap.
It provides an accessible framework for testing hypotheses of
the political determinants of inclusive growth. This can assist
the pursuit of policy learning about the conditions under which
growth emerges, is maintained, and becomes inclusive; or under
which growth decelerates and collapses.
• At the country level, our project will help policymakers in our
case study countries to better understand the constraints on
the maintenance of economic growth, to achieve structural
transformation, and to make growth more inclusive.