Growth, Welfare, and Public Infrastructure: A General Equilibrium Analysis of Latin American Economies

Empirical studies have found infrastructure investment important for a country¡¯s economic performance, but have not provided clear guidelines for infrastructure policy or its effects on other macroeconomic variables. This paper develops a general equilibrium model of a small open economy to study the effects of public infrastructure on output, private investment and welfare. The model is parameterized and solved for three Latin American countries: Brazil, Mexico, and Peru. Results show that infrastructure can have positive effects on output, private investment and welfare. However, raising public infrastructure investment past a certain threshold can be detrimental. All three countries are shown to have under-invested in infrastructure in the 1970s and 1980s. The gains from optimal infrastructure policy are greatest for Peru, the country with lowest infrastructure expenditure.

Road Construction and Regional Development

This report investigates the effect of roads on economic development

Financial Development and the Distribution of Income in Latin America and the Caribbean

One of the central concerns in Latin America and the Caribbean (LAC) has been the reduction of poverty and inequality so prevalent in the continent. Using large world samples, the literature has found that financial development increases economic growth, increases the income of the poor, and reduces inequality. This paper studies the effects of financial development on the whole distribution of income in LAC. We find that the income of the poorest quintile has not been affected by expansion in the financial system. However, we do find that financial development has had a disproportionate positive effect on the incomes of the second, third and fourth quintiles. We also find some evidence for the Greenwood-Jovanovic (1991) hypothesis that this positive effect only begins after a country crosses a certain economic development threshold.distribution of income, financial development, inequality

The Demographics of Georgia IV: Hispanic Immigration Economic Policy Issues - Brief

This report analyzes the economic policy issues in education, health care, the labor market, financial services and the fiscal impact arising from the large increase in Hispanic immigration in Georgia. FRC Brief 12

Who gets the credit ? and does it matter ? household vs. firm lending across countries

While the theoretical and empirical finance literature has focused almost exclusively on enterprise credit, about half of credit extended by banks to the private sector in a sample of 45 developing and developed countries is to households. The share of household credit in total credit increases as countries grow richer and financial systems develop. Cross-country regressions, however, suggest a positive and significant impact on gross domestic product per capita growth only of enterprise but not household credit. These two findings together partly explain why previous studies have found a small or insignificant effect of finance on growth in high-income countries. In addition, countries with a lower share of manufacturing, a higher degree of urbanization, and more market-oriented financial systems have a higher share of household credit. It is thus mostly socio-economic trends that determine credit composition, while policies influencing banking market structure and regulatory policies are not robustly related to credit composition.Access to Finance,Banks&Banking Reform,Economic Theory&Research,,Debt Markets

The Demographics of Georgia IV: Hispanic Immigration Economic Policy Issues

This report analyzes the economic policy issues in education, health care, the labor market, financial services and the fiscal impact arising from the large increase in Hispanic immigration in Georgia. FRC Report 12

IMF Conditionality and Objections: the Russian Case

Emerging economies in crisis typically request assistance from the International Monetary Fund (IMF). After evaluating the situation, the IMF makes a loan available to the country conditional on certain policy reforms. Governments usually resist many of these measures and negotiation ensues. This paper analyzes the most contentious measures of IMF conditionality in the context of Russia after the August 1998 crisis. The most discussed measures include the budget deficit, structural reforms, and exchange rate policy. Our analysis suggests that to some extent the disagreement arose because the IMF is focused on changing steady states somewhat ignoring the transition path, while the Russian government is preoccupied with transitional dynamics without a clearly defined steady state concept.Working Paper Number 00-03

Stock Markets, Banks and the Sources of Economic Growth in Low and High Income Countries Stock Markets, Banks and the Sources of Economic Growth

Abstract This paper studies the effects of stock markets and banks on the sources of economic growth, productivity and capital accumulation, using a large cross country panel that includes high-and low-income countries. Results show that, in Low Income countries, banks have a sizable positive effect on capital accumulation. We find that stock markets, however, have not contributed to capital accumulation or productivity growth in these countries. Given the emphasis that has been placed in developing equity markets in developing countries, these findings are somewhat surprising. Conversely, in high-income countries, stock markets are found to have sizable positive effects on both productivity and capital growth, while banks only affect capital accumulation JEL Classification: G1, O4