Working Papers
2000
January 1, 2000
Financial Crisis and Credit Crunch in Korea: Evidence From Firm-Level Data
Description: This paper analyzes the credit crunch following the recent financial crisis in Korea. Using enterprise-level data, we find that there were big differences in the magnitude of the credit contraction across different types of firms. In particular, chaebol (conglomerate)-affiliated firms appeared to have lost the preferential access to credit they enjoyed in the pre-crisis period, and credit appears to have been reallocated in favor of more efficient firms. This suggests that the credit crunch suffered by certain sectors can be attributed to the adjustment by banks and enterprises to the restructuring of the financial sector, rather than to tight monetary policy or an external credit constraint.
January 1, 2000
Corruption and Military Spending
Description: Anecdotal evidence relates corruption with high levels of military spending. This paper tests empirically whether such a relationship exists. The empirical analysis is based on data from four different sources for up to 120 countries in the period 1985–98. The association between military spending and corruption is ascertained by using panel regression techniques. The results suggest that corruption is indeed associated with higher military spending as a share of both GDP and total government spending, as well as with arms procurement in relation to GDP and total government spending. This evidence indicates that defense spending can be considered for constructing governance indicators.
January 1, 2000
Monetary Policy in Transition: The Case of Mongolia
Description: This paper analyzes monetary policy in transition. It examines the dynamics of monetary policy in Mongolia using granger-causality tests for monetary variables and inflation. The paper also analyzes money demand using data from 22 Mongolian regions during 1993-1998. The analyses confirm the key role of monetary policy in stabilization and reveal that even in a transition economy as rudimentary as Mongolia, a stable money demand and a predictable relationship between inflation and monetary variables do exist. Hence market-based monetary policy is effective. In addition, the analysis points to a difference between transition and industrial economies in the elasticity of money demand with respect to activity, reflecting the larger role for transactions demand for money.
January 1, 2000
What Will Happen to Financial Markets When the Baby Boomers Retire?
Description: This paper explores whether changes in the age distribution have significant effects on financial markets that are rational and forward-looking. It presents an overlapping generations model in which agents make a portfolio decision over stocks and bonds when saving for retirement- Using the model to simulate a baby boom-baby bust demonstrates that returns to baby boomers will be substantially below returns to earlier generations, even when markets are rational and forward-looking. This result is important because the current debate over how to reform pay-as-you-go pension systems often takes historical returns on financial assets—and on the equity premium—as given.
January 1, 2000
International Trade and Productivity Growth: Exploring the Sectoral Effects for Developing Countries
Description: The paper estimates an empirical relation based on Krugman’s ‘technological gap’ model to explore the influence of the pattern of international trade and production on the overall productivity growth of a developing country. A key result is that increased import competition in medium-growth (but not in low- or high-growth) manufacturing sectors enhances overall productivity growth. The authors also find that a production-share weighted average of (technological leaders’) sectoral productivity growth rates has a significant effect on the rate of aggregate productivity growth.
January 1, 2000
Composition of Government Expenditure, Human Capital Accumulation, and Welfare
Description: This paper uses a dynamic general equilibrium model calibrated to Ugandan data to examine the welfare effects of alternative scenarios of government expenditure and tax financing. Two expenditure types are considered: social spending that affects human capital, and infrastructure expenditures that affect productivity. The paper finds that social expenditures lead to higher economic growth depending on the form of financing; young generations benefit most from social spending financed by consumption taxes; agents do not substitute between human and physical capital as a result of changes in expenditure composition; and improving the productivity of fiscal expenditure is both growth and welfare enhancing.
January 1, 2000
Intra-Arab Trade: Is it too Little?
Description: This paper estimates a gravity model to address the issue of whether intra-Arab trade is too little. Although gravity models have been extensively used to measure bilateral trade among countries, they have—to the best of our knowledge—never been used to measure intra-Arab trade. Our results suggest that intra-Arab trade and Arab trade with the rest of the world are lower than what would be predicted by the gravity equation, suggesting considerable scope for regional—as well as multilateral—integration. The results also suggest that intra-GCC and intra-Maghreb trade are relatively low while the Mashreq countries exhibit a higher level of intragroup trade.
January 1, 2000
The "Soaring Eagle": Anatomy of the Polish Take-Off in the 1990's
Description: Poland stands out among transition economies as having experienced a relatively short and shallow contraction followed by sustained, vigorous growth. This paper examines various aspects of Poland’s growth performance from 1992 through 1998 at the macroeconomic level as well as across sectors and regions. It discusses the sources of Poland’s growth, showing that early in the decade, improved resource utilization was the paramount determinant, while factor accumulation, supported by rising foreign direct investment inflows, took on increasing importance in the later 1990s.
January 1, 2000
Product Variety and Economic Growth: Empirical Evidence for the Oecd Countries
Description: This paper uses panel data for 19 OECD countries and finds support for the hypothesis that a greater degree of product variety relative to the United States helps to explain relative per capita GDP levels. The empirical work relies upon some direct measures of product variety calculated from 6-digit OECD export and import data. Although the issue is still far from being settled, the emerging conclusion is that the index of relative product variety across countries is significantly correlated with relative per capita income levels.
January 1, 2000
Identifying Domestic and Imported Core Inflation
Description: This paper estimates core inflation in Norway, identified as that component of inflation that has no long-run effect on GDP. The model distinguishes explicitly between domestic and imported core inflation. The results show that (domestic) core inflation is the main component of CPI inflation. CPI inflation, however, misrepresents core inflation in some periods. The differences are well explained by the other shocks identified in the model, in particular the oil price shocks of the 1970s when Norway imported inflation, and the negative noncore (supply) shocks of the late 1980s, which pushed inflation up temporarily relative to core inflation.