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

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

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

International transmission of anticipated inflation under alternative exchange-rate regimes

This paper studies the international transmission of anticipated inflation. A two-country, two-good, two-currency, cash-in-advance model is used to examine analytically and numerically the consequences of changes in a country's inflation rate. Domestic monetary policy influences real activity at home through an inflation-tax channel. These real effects are transmitted to the foreign country via fluctuations in the real exchange rate. Under a flexible nominal exchange rate, inflation is a beggar-thy-neighbor policy. Under a fixed nominal exchange rate, each country suffers a welfare loss when one country inflates. The quantitative results are fairly insensitive to variations in the cash-credit mix used to finance investment expenditures.Foreign exchange rates ; Inflation (Finance)

Who Gets the Credit? And Does It Matter? Household vs. Firm Lending Across Countries

While theory predicts different effects of household credit and enterprise credit on the economy, the empirical literature has mainly used aggregate measures of overall bank lending to the private sector. We construct a new dataset from 45 developed and developing countries, decomposing bank lending into lending to enterprises and lending to households and assess the different effects of these two components on real sector outcomes. We find that: 1) enterprise credit is positively associated with economic growth whereas household credit is not; and 2) enterprise credit is significantly associated with faster reductions in income inequality whereas household credit is not. We also find that the share of household credit is higher in more urban societies, in countries with smaller manufacturing sectors and more market-based financial systems, while market structure and regulatory policies are not related to credit composition