Causality Tests, Interdependence and Model Selection: Aplication to OECD countries 1960-97

This paper compares several methodologies for analysing unidirectional and bi-directional causality between Consumption and GDP in 25 OECD countries during the period 1960-95. For analysing unilateral causality a comparison is made between cointegration tests and joint regression on alternative explanatory variables, with 100% of correct results in the case of joint regression and lower percentages of success for cointegration approach. Bilateral causality is analysed comparing Granger´s test, a modified version of Granger´s test here suggested, TSLS, Hausman´s causality test and other approaches. The main conclusion is that the modified version of Granger´s test performs rather well and that Hausman´s test is very often useful for reinforcing the conclusions of multiple equations models with contemporaneous interdependence. Regarding the bilateral relationship between Consumption and GDP we conclude that there is a moderate degree of contemporaneous relation, with a high degree of dependence of Private Consumption on GDP and a lower dependence in the case of the reverse relation, because GDP is more dependent on supply side conditions than on demand side. This result is relevant for economic policies in less developed countries where very often emphasis is made more in the reverse relations than in the main ones.

Indicators of Social Well-Being, Education, Genre Equality and World Development: Analysis of 132 Countries, 2000-2008

In this article we present an analysis of several socio-economic indicators related with quality of life, economic development, human capital, social capital and women participation in politics, management, labor and income. We present some econometric models which relate women income ratio with political, management and labor participation, as well as with the educational level of population, quality of government and real GDP per capita. Regarding quality of life we also analyze some indicators related with health assistance, education expenditure and poverty eradication. The overall conclusion is that international cooperation to foster education is of uppermost importance for world development and human wellbeing. Among the initiatives to reach the Millennium Development Goals it is of uppermost importance to reach a closer cooperation between development economists, journalists, educators and other social agents highly motivated to increase international cooperation for education and poverty eradication.Government quality, Education and Development, Well-being Indicators, World Development, Genre Equality, MDGs

Causality and Cointegration between Consumption and GDP in 25 OECD countries: limitations of cointegration approach

A critical review of cointegration is presented in this paper, emphasizing some limitations of this approach to testing causal relations in Econometrics. Very often the usual way of analysing cointegration leads researchers to declare many important causal relations as spurious when they are obviously not. On the other hand that approach does not always avoid the peril of accepting as causal relations those that really are spurious. An application of the tests to the relation between Private Consumption and Gross Domestic Product in 25 OECD countries, during the period 1960-97, is performed and the results confirm the above mentioned limitations of cointegration tests. The most extreme case is that of the UK where, in one of the applications, the usual tests lead to rejection of cointegration between british Private Consumption and british GDP and acceptance of cointegration of british Private Consumption with GDP of all the other countries. Regarding cointegration we should take into account two important points: one is that many causal relations with autocorrelation coefficient of residuals near 0.9 show a result of uncertainty, or a result of near cointegration, and should not be counted as rejections. A second, equally important point, is that sometimes the problem of no cointegration among several variables, is due to small problems in the specification of the model, easily avoided with some changes in the form of the dynamic relation, and not to the existence of non-causal relations.

Industry, Foreign Trade and Development: Econometric Models of Europe and North America, 1965-2003

We compare several econometric models of Western Europe, Central Europe, the United States, Canada and Mexico in order to analyze the impact of foreign trade and industry on development Regarding the positive effects of foreign trade it is important to notice that they are more due to the positive role of imports from the supply side than to the effect of exports from the demand side, although both sides are relevant. The main benefit from increasing exports is usually to increase the capacity to import intermediate inputs and other goods and services which are necessary or help to foster economic development in the domestic market. There are many studies which show the positive effects of exports but very few focused on the role of imports, and this study contributes in this regard.. On the other hand the analysis of industrial contribution to the non industrial sectors is twofold: directly providing intermediate and capital goods to non industrial sectors and indirectly increasing exports and the capacity to import foreign inputs which contribute to domestic production.Industry, Foreign Trade, Development, Europe, America

Employment, Wages and Immigration in the European Union: Econometric Models and Comparison with the USA, 1960-2003

Some of the main challenges for European Union at the beginning of the 21st century are to increase the rates of employment and the real wages, particularly in those regions and economic sectors with the lowest levels, as well as to develop realistic policies of net immigration, which should have into account the limitations of EU for employment creation and growth of real Gdp, in order to avoid diminutions of average wages and social services expenditure per inhabitant. We estimate some econometric models which explain the lower rates of employment and wages of Europe in comparison with the USA, analyse those differences during the period 1960-2003 and suggest some changes in EU policies in order to increase both average wages and the rates of employment. EU immigration policies should be realistic and limited to the capacities of jobs creation, and the international cooperation of EU with developing countries should be more focused to foster investments and to increase employment and income per inhabitant in the countries of origin of immigrants.

Economic growth and education: a new international policy.

First of all this paper presents a world wide view of economic growth and education in 1994, with data of population, gross domestic product per head, and public expenditure on education per head for 199 countries grouped in 40 geographical areas. In the second place the paper present an international production function that includes both physical capital and human capital, measured by the stock of population with secondary education of second level complete, as factors of production. The model was fitted with data of 37 countries, of different levels of development, and shows a good fit and the significativeness of the coefficient of both variables. Education has a positive influence in economic development As many countries are very far below the world average of production and education expenditure by inhabitant, measured in purchasing power parities around 5620 dollars for production and 257 for education expenditure by inhabitant, the only way to improve their situation is to foster international co-operation, as many of those countries are unable to cope with their challenges because they are so poor. Education has a positive influence on economic growth also reducing excesses in fertility average rates, creating a social environment that improve productive investment, making workers more productive and voters more prepared to choose a good government and promote reasonable socio-economic policies. The international co-operation should improve also, where needed, better quality in education contents of human values, promoting respect to peace, human rights and equality for women, as well as the learning of one or more widely spoken world languages to avoid isolation and promoting the access to a greater wealth of information.

REAL EXCHANGE RATE EURO-DOLLAR AND FOREIGN TRADE BALANCE: ANALYSIS OF SPAIN, GERMANY AND FRANCE IN COMPARISON WITH THE USA. 1960-2007

One aim of this paper is to relate the evolution of real exchange rate Euro-Dollar to the foreign trade balance, with analysis three European countries: Spain, Germany and France, for the period 1960-2007. A second question is to analyse the effects of changes of REER on the evolution of Exports and Imports. A third point is to evaluate the impact of those changes on industrial and non industrial production and economic growth. We estimate an econometric model for the case of Spain that explains the causes and consequences of the huge increase of the trade deficit during the period 2004-2009 and we insist on the convenience to develop economic policies aimed to get higher levels of industrial production per inhabitant to increase Exports and to moderate foreign trade deficit.

Human Capital, Population Growth and Industrial Development in Mexico and Turkey: A Comparative Analysis with Other OECD Countries, 1964-2004

Mexico and Turkey have experienced an important growth during the last decades of the 20th century but they have, in spite of that, a low level of real income per inhabitant in comparison with OECD averages. This paper analyses the main economic features of these countries, in comparison with other OECD countries, and suggest some economic policies of interest to foster economic development and employment during the next decades, with special focus on human capital and industrial development.

Exchange Rates, Foreign Trade Prices and PPs in OECD Countries: An Analysis of the period 1960-2003

We analyse the evolution of Exchange Rates of Euro and previous national currencies of Euro Zone, as well as those corresponding to other currencies of OECD countries, with particular emphasis on the reaction of exchange rates to inflation differences, and the consequences of those changes on foreign trade and economic growth. We also compare the evolution of Exchange Rates and Purchasing Power Parities in those countries for the period 1960-2003. We present main comparative data and some econometric models which show the strong inverse relationships between the movements of relative domestic prices and exchange rates of domestic currencies to dollar, and test for homogeneity of this relationship among OECD countries.

RATES, RATIOS AND PER CAPITA VARIABLES IN INTERNATIONAL MODELS: ANALYSIS OF INVESTMENT AND FOREIGN TRADE IN OECD COUNTRIES

Some econometric models try to explain the rate of growth of real Gross Domestic Product per capita as a function or ratios like Investment/GDP or Exports/GDP, with confusing results and conclusions which are misleading when the studies do not show a positive impact of the explanatory variables. Some of these approaches are inspired in the Solow model which is indeed interesting at a theoretical level when the hypotheses of the model hold in one country for a short period of time, but some hypothesis of the model do not hold in long samples of a same country or in international comparisons. Usually economic growth of real GDP per capital increases with Investment per capita but the Investment/GDP ratio usually diminish with the increase of Investment per capita. In the vase of these two explanatory variables it is much more convenient and realistic to use real values per capita instead of ratios for the explanation of economic development. Besides we include other considerations of interest regarding international differences of Exports per capita among countries. We present data, graphs and estimations of interest in this regard for 25 OECD countries.O51, O52, O54, O57