The external effects of public sector deficits

This paper develops a two equation model for measuring how public sector deficits - and the way that they are financed - affect the real exchange rate, the trade balance, the current account and the level of external indebtedness. One equation relates the real exchange rate to the trade surplus and the other describes the trade surplus as a function of structural parameters, the fiscal deficit, and the stock of foreign assets. To make the model dynamic, one must allow for the fact that the level of foreign assets - one determinant of the trade surplus and current account - changes over time. The trade surplus, plus foreign internest earned, determines the evolution over time of the stock of foreign assets. Using this model, the paper makes the following conclusions. The level and composition of government spending affects the real exchange rate because of the effect of spending on nontraded goods. Changes in the trade balance are also bound to affect the real exchange rate. How much depends on how much expenditure must be switched to make the trade balance compatible with the change in aggregate spending.Economic Theory&Research,Economic Stabilization,Environmental Economics&Policies,Macroeconomic Management,Public Sector Economics&Finance

Boon or Burden? The Effect of Private Sector Debt on the Risk of Sovereign Default in Developing Countries

We explore how the share of the private sector in total external debt affects perceived creditworthiness and the likelihood of sovereign default in developing countries. While there are theoretical arguments both in favor and against a stabilizing role of private-sector borrowing, the evidence clearly supports the notion that a greater share of the private sector in total external debt is associated with a reduced likelihood of sovereign default. --International Investment,Sovereign Risk

Fiscal policy and indeterminacy in models of endogenous growth

This paper investigates the dynamic behavior of two-sector models of endogenous growth with sector-specific external effects, and government expenditure financed by distortionary taxation. When this type of external effect is combined with a sufficient degree of capital taxation in a Lucas–Uzawa endogenous growth model, continua of equilibria will emerge in the region of the balanced growth paths. By contrast, indeterminacy is not possible when either sector-specific external effects or factor taxation are added to the model in isolation. In the second part of the paper, we demonstrate that if labor supply is endogenous, indeterminacy can be consistent with much lower degrees of increasing returns to scale. Furthermore, certain types of fiscal policy will be associated with multiple balanced growth paths and the existence of a poverty trap. Finally, in the last part of the paper, we demonstrate that if physical capital is employed in both sectors of the economy, indeterminacy will emerge for varying combinations of factor taxation and external effects, even when returns to scale are constant at the social level

Impacts of External Price Shocks on Malaysian Macro Economy-An Applied General Equilibrium Analysis

This paper examines the impacts of external price shocks in the Malaysian economy. There are three simulations are carried out with different degrees of external shocks using Malaysian Social Accounting Matrix (SAM) and Computable General Equilibrium (CGE) analysis. The model results indicate that the import price shocks, better known as external price shocks by 15% decreases the domestic production of building and construction sector by 25.87%, hotels, restaurants and entertainment sector by 12.04%, industry sector by 12.02%, agriculture sector by 11.01%, and electricity and gas sector by 9.55% from the baseline. On the import side, our simulation results illustrate that as a result of the import price shocks by 15%, imports decreases significantly in all sectors from base level. Among the scenarios, the largest negative impacts goes on industry sectors by 29.67% followed by building and construction sector by 22.42%, hotels, restaurants and entertainment sector by 19.45%, electricity and gas sector by 13.%, agriculture sector by 12.63% and other service sectors by 11.17%. However significant negative impact goes to the investment and fixed capital investment. It also causes the household income, household consumption and household savings down and increases the cost of livings in the economy results in downward social welfare.External Price Shocks, Applied General Equilibrium Analysis, Malaysian economy

Does Regionalism Affect Trade Liberalization Towards Non-Members?

We examine the effect of regionalism on unilateral trade liberalization using industry-level data on applied MFN tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. We find that preferential tariff reduction in a given sector leads to a reduction in the external (MFN) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these "complementarity effects" of preferential liberalization on external liberalization do not arise in customs unions. Overall, our results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.regionalism, external tariffs, trade liberalization

Bangladesh 2020 - An Analysis of Growth Prospect and External Sector Behaviour

External factors such as export, import, remittances and foreign aid have always played important roles to Bangladeshs economy, though the relative importance of various external factors has changed over time. This study has analysed the trend, structure and changing features of the external sector of Bangladesh. Based on the past performance and changes in the global economy, the study has projected the growth prospect and likely behaviour of Bangladeshs external sector under three scenarios : (i) optimistic scenario (8% GDP growth per annum), (ii) business as usual scenario (6% GDP growth per annum), and (iii) base case scenario (4% GDP growth per annum). Under these three scenarios, the study has projected the level of total GDP and per capita GDP of Bangladesh till FY2020. Projections are made about the required level of exports, imports, remittances, foreign aid and foreign investment to attain a consistent GDP growth at the rate of 4%, 6% and 8% up to the year 2020. The paper has also put forward the implications of the findings for policies related to the external sector of Bangladesh. The paper suggests that Bangladesh needs a steady growth based on foreign investment, service income and trade. The report adds that future growth of Bangladesh will depend on promoting export, sustaining remittances, and triggering export. Bangladesh will require a breakthrough in the performance of the external sector. According to the report, the key to the breakthrough lies in effective integration of Bangladeshs economy with the global economy which will ultimately depend on the ability of political leadership to undertake necessary policy reforms and institution building measures.

Bangladesh 2020: An Analysis of Growth Prospect and External Sector Behaviour

External factors such as export, import, remittances and foreign aid have always played important rolesto Bangladesh’s economy, though the relative importance of various external factors has changed over time. This study has analysed the trend, structure and changing features of the external sector of Bangladesh. Based on the past performance and changes in the global economy, the study has projected the growth prospect and likely behaviour of Bangladesh’s external sector under three scenarios: (i) optimistic scenario (8% GDP growth per annum), (ii) business as usual scenario (6% GDP growth per annum), and (iii) base case scenario (4% GDP growth per annum). Under these three scenarios, the study has projected the level of total GDP and per capita GDP of Bangladesh till FY2020. Projections are made about the required level of exports, imports, remittances, foreign aid and foreign investment to attain a consistent GDP growth at the rate of 4%, 6% and 8% up to the year 2020. The paper has also put forward the implications of the findings for policies related to the external sector of Bangladesh. The paper suggests that Bangladesh needs a steady growth based on foreign investment, service income and trade. The report adds that future growth of Bangladesh will depend on promoting export, sustaining remittances, and triggering export. Bangladesh will require a breakthrough in the performance of the external sector. According to the report, the key to the breakthrough lies in effective integration of Bangladesh’s economy with the global economy which will ultimately depend on the ability of political leadership to undertake necessary policy reforms and institution building measures.External Sector,Growth, Bangladesh

Does regionalism affect trade liberalization toward non-members ?

This paper examines the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. The findings show that preferential tariff reduction in a given sector leads to a reduction in the external (most-favored nation) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these"complementarity effects"of preferential liberalization on external liberalization do not arise in customs unions. Overall, the results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.Free Trade,Trade Policy,International Trade and Trade Rules,Trade and Regional Integration,Trade Law

Joint External Evaluation of the Health Sector in Tanzania:1999-2006

This is a historic evaluation. It is (probably) the first ever sector evaluation which is fully in line with the 2005 Paris Declaration on Aid Effectiveness: The evaluation was led by Tanzania’s Ministry of Finance and looks into an entire sector and the role and contributions of all domestic and external stakeholders including government authorities at all levels, civil society organisations, and the private sector in Tanzania; and all development partners, bilateral and multilateral. The aim is not limited to improving the performance of individual donors, but to feed into Tanzania’s Third Health Sector Strategic Plan covering 2008-15 and to give recommendations on how all stakeholders can best contribute towards \ud the plan. The Evaluation was carried out from December 2006 to September 2007 by a consortium of COWI, Denmark; Goss Gilroy, Canada; and EPOS, Germany. Team Leader was Ted Freeman of GGI, Canada. Six development partners: Belgium, Canada, Denmark, Germany, the Netherlands and Switzerland were the major funders of the direct cost of the evaluation. The management of the evaluation was conducted by a management group comprising of Denmark, Germany and Tanzania.\u

Polarization of the Swedish University Sector Structural Characteristics and Positioning

Universities have increasingly been facing a focus on competition for research resources, not the least for external funding. This paper studies structural characteristics of the Swedish university sector and these characteristics relation to the propensity of universities to attract external research funding. The findings show a clear polarization of the sector into ‘Larger research and teaching intensive’ universities, accessing the lion’s share of external research funding, and ‘Smaller education dependent’ higher education institutions. Following from this, the paper discusses specialization and division of labor among universities, in relation to the ability to gain critical mass and excellence in research.