1,720,969 research outputs found
Is the Rate of Economic Convergence in Central, Eastern and Southeastern European Countries Really High?
Get PDFThis paper uses the augmented version of the Solow growth model and the determinants-of-growth regressions approach to examine the convergence in standards of living among Central, Eastern, and Southeastern European (CESEE) countries. For different variables that are held constant in order to proxy the country's steady-state level, the results of our exercise show unexpectedly high rates of economic convergence that range from 4.2% to 8,2% per year. It might imply that our first-differenced GMM estimator is seriously biased downwards
Some new insights on economic convergence and growth in Central, Eastern, and Southeastern Europe
No full textThe existing empirical literature on economic convergence and growth emphasizes the importance of foreign capital inflows for the Central, Eastern, and Southeastern European (CESEE) countries. This paper challenges such arguments by stating that not all forms of foreign capital inflows are beneficial for the economic growth of CESEE countries. Our results suggest that remittances (as an alternative foreign capital inflow) tend to slow down economic growth. Moreover, apart from the prevailing trends to investigate the economic convergence of CESEE towards Western European countries, this paper focuses on economic convergence within the CESEE region, that is, on economic convergence of the non-EU CESEE countries towards EU CESEE countries. We found that, in the last two decades, the living standard in the CESEE region has become increasingly equal. There is a tendency for poorer non-EU CESEE countries to grow faster than richer EU CESEE countries, which confirms the existence of absolute β
-convergence. We have also found that each CESEE country converges 2.8% closer to its own steady state, in the sense of conditional β
, every year
Improving Short-Term Forecasting of Macedonian GDP: Comparing the Factor Model with the Macroeconomic Structural Equation Model
No full textThis paper evaluates two different models for short-term forecasting of Macedonian GDP: (a) the medium-scale static factor model, based on static principal components analysis, and (b) the small-scale macroeconomic structural equation model. Recursive dynamic pseudo out-of-sample forecasts, based on a panel of quarterly time series, indicate that forecast errors of the factor model are smaller overall in comparison to errors of the structural equation model at all forecast horizons. In line with the existing short-term GDP forecasting practice, our medium-scale factor model (that extracts common factors from a data set of 52 variables) diversifies and strengthens the current macroeconomic forecasting strategy in Macedonia
Too Much of a Good Thing? Endogenous Human Capital and Nonlinear Growth Beyond the Middle-Income Trap
No full textThis paper develops a nonlinear growth model to examine how human capital shapes long-run growth and convergence, with particular attention to the dynamics of the middle-income trap. Human capital is modelled as a determinant of absorptive capacity, enhancing economies' ability to adopt and utilize advanced technologies. While retaining the core logic of the neoclassical framework, the model relaxes the constant-elasticity assumption, allowing the productivity effect of education to vary endogenously with its level. This captures both saturation and composition effects that shape convergence trajectories and govern the transition from imitation to innovation. Empirically, the analysis combines a production-function and a macro-Mincerian specification and employs a rolling-threshold estimation strategy that mitigates endogeneity in both covariates and threshold variables. The results show that human capital promotes growth at low levels, consistent with technology-driven catch-up, but its marginal effect declines and may even turn negative beyond a critical schooling threshold. Higher initial education also amplifies the responsiveness of growth to initial income, implying that convergence may slow or even reverse at middle-income stages. This reconciles conflicting evidence in the growth literature and suggests that the middle-income trap arises when educational expansion is not accompanied by improvements in technological adaptability and institutional capacity
Reopening the debate on the relationship among remittances, household consumption stability, and economic growth in emerging markets
No full textThe impact of remittances on household consumption stability and economic growth is not quite clear. This paper attempts to reopen the debate on the relationship among these three variables. The current remittance literature suggests that a decrease in household consumption volatility, induced by remittances, automatically leads to economic growth. This paper challenges these arguments by stating that, under certain circumstances, there is no automatic relationship among remittances, household consumption stability, and growth. We approach the question from the perspective of emerging Central, Eastern, and Southeastern European (CESEE) countries. We use the two-step system GMM estimator with the Windmeijer (2005) finite-sample correction. To test the existence of the possible non-linear effects of remittances on household consumption stability and economic growth, we use threshold regressions. We find that remittances significantly reduce household consumption volatility. They exhibit a consumption-smoothing effect on recipient households. This stabilizing effect happens not through the preventive role of remittances, but rather through their compensatory role. Remittances produce a weaker stabilizing effect on household consumption when the remittance to GDP ratio of the recipient country is above the estimated threshold level of 4.5%. We also find that there is a negatively significant and linear impact of remittances on growth. There is no evidence to suggest that remittances can foster productive investment and therefore promote economic growth in CESEE countries, which means: (1) that the remittances cannot be treated as a source of funds to invest in human and physical capital, and (2) that the remittances are compensatory rather than profit-oriented. As far as we are aware, this is the first study that investigates the impact of remittances on both household consumption stability and economic growth simultaneously
An assessment of the dynamic effects of monetary policy in Macedonia
No full textMacedonia, as a small emerging economy, is exposed to foreign risks such as: exchange rate volatility, trade distortions, and highly volatile capital flows. To ‘protect’ its economy, since 1995, the Macedonian Central Bank has applied the monetary strategy of exchange rate targeting, where the interest rate on Central Bank bills auctions is a basic monetary-policy instrument. This paper re-examined the effectiveness of the current monetary policy in Macedonia using the policy-oriented vector error correction model (VECM). We found that the Macedonian Central Bank demonstrates a low level of monetary-policy effectiveness and the existing monetary-policy strategy does not necessarily promote its ability to react countercyclically
Human Capital and Economic Growth in OECD Countries Revisited: Initial Stock versus Changes in the Stock of Human Capital Effects
No full textThis paper investigates the effect of human capital on economic growth in OECD countries by focusing on two different channels: (1) absorption of superior technologies, and (2) augmentation of factors of production. One recent empirical study found that in isolation each channel appears insignificant, which implies that estimates that emanate by restrictive specifications that account for only a subset of these channels are likely to suffer from an omitted variable bias. Using an augmented specification (with interaction terms between the initial level of real GDP per capita and the average years of schooling), we find that OECD countries that start with a higher stock of human capital grow faster, which implies that human capital influences economic growth through the first channel only. Our results differ from previous studies (that investigated both channels), which either confirmed the simultaneous (positive or neutral) effect from both channels, or found that only the second channel had an isolated positive effect. We use a broad array of measures as proxies for human capital (six measures for educational attainment, and two measures for health status). We also account for the quality of human capital
On the inconclusive effect of human capital on growth: A new look at extended specifications
No full textOne of the reasons for the weak and inconclusive effect of human capital on growth in existing cross-country studies may be the use of inappropriate specifications that do not account for different channels through which human capital affects economic growth. It has been suggested that both the initial stocks and changes in the human capital stocks have positive growth effects when considered together, while each channel often appears insignificant in isolation. This implies that the effect of human capital is likely to be underestimated in restricted (single-channel) specifications. However, this paper shows that extended (two-channel) specifications might also fail to provide a reasonable explanation for the inconsistent human capital effects in existing growth literature. It seems that the omitted variable bias problem resulting from the ‘incomplete’ specification of human capital in growth regression may not be as pronounced as expected. In addition, we consider some aspects of measurement error and low signal in the changes in human capital
FACTORS LIMITING INVESTMENT IN HUMAN CAPITAL IN MACEDONIA
Get PDFThere is a strong link among investments in human capital, economic growth and human development. Since human capital (improvements in the quality of human labour) is embodied technical progress in labour (knowledge and skills), the economic development depends on advances in technological and scientific knowledge, economic development depends on the investments in human capital. The first part of the paper outlines the two key concepts related to investment in human capital - the basic economic concept and the human development concept. The second part is related to the limitations regarding the investment in human capital in Macedonia, expressed through four major dimensions: 1) poverty and inequality; 2) economic policy; 3) absence of a clear link between economic growth (GDP per capita) and human quality of life (HDI) and 4) the access of individuals to the capital market and to information.Investment in human capital; Human development; Economic growth and development; Economic policy.
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