Economic Progress and Growth

334 Pages·1994·7.475 MB·English

by  Karsten Nimb Pedersen (auth.), H. M. Scobie (eds.)

ECONOMIC PROGRESS
AND GROWTH
INTERNATIONAL STUDIES IN ECONOMIC MODELLING
Series Editor
H. M. Scobie
Executive Director
European Economics and Financial Centre
P. O. Box 2498
London W2 4LE
Tel: [phone]
Fax: [phone]
1 Economic Modelling in the OECD Countries
H. Motamen-Scobie
2 Modelling the Labour Market
Edited by M. Beenstock
3 Input-Output Analysis
Current developments
Edited by M. Ciaschini
4 Models of Disequilibrium and Shortage in Centrally Planned Economies
C. Davis and W. Charemza
5 Economic Modelling at the Bank of England
Edited by S. G. B. Henry and K. D. Patterson
6 Recent Modelling Approaches in Applied Energy Economics
Edited by O. Bjerkholt, O. 0lsen and J. Vislie
7 International Commodity Market Models
Advances in methodology and applications
Edited by O. Giivenen, W. C. Labys and ).-B. Lesourd
8 Dynamic Models for the Inter-relations of Real and Financial Growth
H. Ekstedt and L. Westberg
9 Economic Models and Trade Unions
Edited by P. Garonna, P. Mori and P. Tedeschi
10 International Energy Economics
Edited by Thomas Sterner
11 International Trade Modelling
Edited by M. G. Dagenais and P.-A. Muet
12 Continuous Time Econometrics
Theory and applications
Edited by Giancarlo Gandolfo
13 Empirical Approaches to Fiscal Policy Modelling
Edited by Alberto Heimler and Daniele Meulders
14 Inflation
Penelope A. Rowlatt
15 Modelling the Structure of the Economy
Maurizio Ciaschini
16 Econometric Modelling of World Shipping
Michael Beenstock and Andreas Vergottis
17 Income Redistribution and Social Security
An application of microsimulation
J. H. M. Nelissen
18 Economic Progress and Growth
Edited by H. M. Scobie
Economic Progress
and Growth
Edited by
H. M. Scobie
European Economics and Financial Centre London, UK
CHAPMAN & HALL
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First edition 1994
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Contents
Contributors vii
Introduction to the series ix
Preface xi
1 The prototypical developing country model of the
the World Bank global economic model 1
Karsten Nimb Pedersen
2 A quarterly econometric model of an LDC monetary system:
the case of Egypt 29
Salah El-Sheikh
3 An econometric model of the Sri Lankan economy 65
Nelson Perera
4 A rational expectations model of the Indian economy 111
Anupam Rastogi
5 A computable general equilibrium (CGE) analysis
of the Thai economy 177
Mifsuo Ezaki
6 The income distributional consequences of export growth in Brazil 221
Robert David Cruz and Maria]. Willumsen
7 A macroeconometric model for Israel 1962-90: a market
equilibrium approach to aggregate demand and supply 241
Michael Beenstock, Yaakov Lavi and Akiva Offenbacher
Index 321
Contributors
Michael Beenstock Department of Economics, Faculty of Social Sciences,
Hebrew University of Jerusalem, Mount Scopus,
Jerusalem 91905, Israel
Robert David Cruz North-South Center, University of Miami, PO Box
248205, Coral Gables, Florida 33124-3027, USA
Salah EI-Sheikh St Francis Xavier University, Antigonish, Nova Scotia,
Canada
Mitsuo Ezaki Graduate School of International Development, Nagoya
University, Furo-cho, Chikusa-ku, Nagoya 464-01, Japan
Yaakov Lavi Research Department, Bank of Israel, Israel
Akiva Offenbacher Research Department, Bank of Israel, Israel
Karsten Nimb Pedersen Analysis and Prospects Division, International
Economics Department The World Bank,
1818 H Street, NW, Washington, DC 20433, USA
Nelson Perera Department of Economics, University of Wollongong,
PO Box II44, Wollongong, NSW 2500, Australia
Anupam Rastogi Department of Economics and Accounting, University
of Liverpool, PO Box 147, Liverpool L69 3BX, UK
Maria J. Willumsen Department of Economics, Florida International
University, Miami, Florida 33199, USA
Introduction to the series
There has been a growing dependence in the past two decades on modelling as a tool
for better understanding of the behaviour of economic systems, and as an aid in policy
and decision making. Given the current state of the art globally, the introduction of a
series such as this can be seen as a timely development. This series will provide a forum
for volumes on both the theoretical and applied aspects of the subject.
International Studies in Economic Modelling is designed to present comprehensive
volumes on modelling work in various areas of the economic discipline. In this respect
one of the fundamental objectives is to provide a medium for ongoing review of the
progression of the field.
There is no doubt that economic modelling will figure prominently in the affairs of
government and in the running of the private sector, in efforts to achieve a more rational
and efficient handling of economic affairs. By formally structuring an economic system,
it is possible to simulate and investigate the effect of changes on the system. This is
tum leads to a growing appreciation of the relevance of modelling techniques. Our aim
is to provide sufficient space for authors to write authoritative handbooks, giving basic
facts with an overview of the current economic models in specific areas and publish a
useful series which will be consulted and used as an accessible source of reference.
The question may arise in some readers' minds as to the role of this series vis-a-vis
other existing publications. At present, no other book series possesses the characteristics
of International Studies in Economic Modelling and as such cannot fill the gap that will be
bridged by it. Those journals which focus in this area do not present an exhaustive and
comprehensive overview of a particular subject and all the developments in the field.
Other journals which may contain economic modelling papers are not sufficiently broad
to publish volumes on all aspects of modelling in a specific area which this series is
designed to cover.
A variety of topics will be included encompassing areas of both micro and macro
economics, as well as the methodological aspects of model construction. Naturally, we
are open to suggestions from all readers of, and contributors to, the series regarding its
approach and content.
x Introduction to the series
Finally, I would like to thank all those who have helped the launch of this series. The
encouraging response received from authors who have contributed the forthcoming
volumes and from the subscribers to the series has indicated the need for such a
publication.
H. M. Scobie
European Economics and Financial Centre
London, 1994
Preface
This volume puts forward a group of models applied to different economies, capturing
the progress and growth of their economic systems. The models provide a quantified
framework for the formulation of economic policy. They aid the introduction of targets
and policy instruments taking account of constraints in the process of development.
Also, an evaluation of external and internal shocks is taken using a comparative static
type of analysis. The models take into account constraints which are in the nature of
institutional as well as supply constraints.
Problems of data exist in any quantitative analysis and account was taken of this
factor in presenting the models and the results reached. Nonetheless, the models attempt
to specify, estimate and simulate a given macroeconomic system.
Models of this type are not freely available to the interested reader, but only in a
fragmented way. This book puts the efforts of a group of economists worldwide under
one cover. It is believed that the collection will be of interest both for courses in planning
and for those adviSing these countries such as international organizations, research bodies,
etc. Moreover, an overview of trade policy and income distributional factors is presented.
It is hoped that this collection will prove interesting and useful to economists world
wide.
H. M. Scobie
London
September, 1993
1
The prototypical developing
country model of the World Bank
global economic model
KARSTEN NIMB PEDERSEN
1.1 INTRODUCTION
This chapter documents the developing country model currently used by the World
Bank's global model, Bank-GEM. The country model, describing about 100 developing
countries, is one bUilding block of a global system that includes an international linkage
scheme, commodity price models, and models of the high-income countries.
Briefly, the developing country model has a fully specified income-expenditure mechan
ism. While public sector consumption and investment are policy levers, private consump
tion and investment are empirically determined. The inclusion of net wealth in private
consumption and the rate of long-term debt to output in private investment gives the
model an empirical control of indebtedness and the impact of indebtedness on real
demand. A domestic supply-side is modeled by a modified unit cost-function which
determines the good market's equilibrating price level. One feature of the cost-function
is the inclusion of the capital stock which produces a full capacity output and inflation
trade-off. The inclusion of a foreign trade sector permits the joint determination of the
real rate of exchange and the domestic GOP. In addition, a detailed set of balance of
payments accounts and government accounts are included. By modelling components
of the invisibles of the current account and the elements of the capital account at a
detailed level, an accurate description of the requirements for financing can be read from
the model results. Finally, the inclusion of the public sector accounts allows for the
calculation of the deficit of the public sector and of the nominal and real savings/ dissavings
of the public sector. The flows of the fiscal accounts, together with the balance of
payments flows, determine the change in the private sector's net wealth position.
The structure of the country model is presented in Section 1.2. The model's behavioral
Economic Progress and Growth, Edited by H. M. Scobie.
Published in 1994 by Chapman 8t Hall, London. ISBN 0412575108