DOCSLIB.ORG

Varieties of Stabilization Experience: Towards Sensible Macroeconomics in the Third World by LANCE TAYLOR

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Varieties of Stabilization Experience: Towards Sensible Macroeconomics in the Third World by LANCE TAYLOR This is a rekeyed full text file of the volume Varieties of Stabilization Experience: Towards Sensible Macroeconomics in the Third World By LANCE TAYLOR Originally published in 1988 by Oxford University Press the book is now out of print and the copyright has reverted to UNU-WIDER. File produced by Macmillan Publishing Solutions, Chennai WIDER Studies in Development Economics embody the output of the research programmes of the World Institute for Development Economics Research (WIDER), which was established by the United Nations University as its first research and training centre in 1984 and started work in Helsinki in 1985. The principal purpose of the Institute is to help identify and meet the need for policy-oriented socio-economic research on pressing global and development problems, as well as common domestic problems and their inter-relationships. Varieties of Stabilization Experience Towards Sensible Macroeconomics in the Third World LANCE TAYLOR CLARENDON PRESS · OXFORD 1988 Oxford University Press, Walton Street, Oxford OX2 6DP Oxford New York Toronto Delhi Bombay Calcutta Madras Karachi Petaling Jaya Singapore Hong Kong Tokyo Nairobi Dar es Salaam Cape Town Melbourne Auckland and associated companies in Berlin Ibadan Oxford is a trade mark of Oxford University Press Published in the United States by Oxford University Press, New York © World Institute for Development Economics Research of the United Nations University 1988 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser British Library Cataloguing in Publication Data Taylor, Lance Varieties of stabilization experience: towards sensible macroeconomics in the Third World. 1. Developing countries. Economic conditions. Stabilisation I. Title 339.5’09172’4 ISBN 0–19–828638–4 Library of Congress Cataloging in Publication Data Data available Set by Cotswold Typesetting Limited, Gloucester Printed and bound in Great Britain by Biddies Ltd, Guildford and King’s Lynn WIDER PREFACE For more than a decade now, most developing countries have been subject to a succession of shocks emanating largely from changes in the international economic environment. These shocks invariably disrupted the working of their economies, forcing on them relatively long periods of stabilization and adjustment to restore equilibrium conditions. How can developing countries cope with such situations? What are the policy options open to them? Until recently these questions were sought to be addressed largely within the framework of orthodox macroeconomics. This is reflected in the stabilization packages advocated by the International Monetary Fund for a large number of developing countries in the recent past. By and large these involved a set of austerity measures sweetened with conditional balance of payments support under the auspices of the international financial institutions. The degree to which this standard approach was relevant or successful was the focus of a WIDER research project involving a series of country studies. More specifically, the research focused on whether alternative policy packages could have been devised in particular country situations which would contribute to desirable adjustment and development goals, i.e., an improved balance of payments and higher growth rates, at a lower social cost than that incurred by the country packages that were in fact negotiated. The general finding of the WIDER research studies was that countries were hard hit by the shocks; but adjusted in different ways, depending on their own local institutions, macroeconomic structure, and relationships among major political and social groups. The wealth of country-based experience has clearly established the need for a departure from the earlier perspective of a standard approach to the design of stabilization and adjustment programmes. The new ideas emerging out of the country studies highlight the need to formulate these programmes in a manner appropriate to the institutional and structural characteristics of the eocnomy in question. Orthodox macroeconomics, as reflected in the approach of the International Monetary Fund to stabilization problems, ran mainly vi PREFACE in terms of attaining equilibrium within a narrow monetary framework. In fact, this was defined as financial programming towards the goal of stabilization. The WIDER country studies provide ample evidence to suggest that there is no unified theory or policy to facilitate solutions to problems of stabilization and adjustment. A variety of policies involving a combination of different approaches seems to have worked well, depending on the peculiarities of country situations. What comes out clearly from the WIDER country studies is the need to deal with each country situation within the framework of its own specific economic and social characteristics. A unique feature of the WIDER stabilization studies is the fact that most of the country authors are nationals, who have brought a wealth of local knowledge and experience to an area of macroecono- mics where the international discussion has for the most part been dominated by economists proposing policy on the basis of ideas popular in the developed world. The WIDER research findings in this area have clearly established that current policy and practice cannot be regarded as sacrosanct and needs to be modified if they are to be relevant and effective in dealing with stabilization problems in developing countries. In this context one should welcome the widening debate on these issues and some of the recent changes in policies advocated by the International Monetary Fund in its recommendations for developing countries in Africa. WIDER research will, I would hope, contribute to the evolving process of identifying improved solutions to stabilization and adjustment issues, without damaging the development process itself. Lal Jayawardena Director WIDER ACKNOWLEDGEMENTS If an academic author lifts ideas from two or three others, anyone would call it plagiarism. If she or he has access to ideas from 18 papers, then formulating a synthesis can safely be called ‘research’. This monograph reports on the results of such research. The unsung contributions are papers describing experiences with economic stabilization in 18 developing countries, supported by the World Institute for Development Economics Research (WIDER) in Helsinki. I am extremely grateful to WIDER, its staff, and its director, Lal Jayawardena, for sponsoring the stabilization project, and to Gerry Helleiner who did at least as much as I did to get it organized. Ford Foundation, personified by Tom Bayard, was also generous with research funding. In writing up the project, I have benefited from comments and discussion by all its participants. Reg Green and Gerry Helleiner contributed pages and pages of written observations. John Toye chipped in with very astute remarks on a summary version of the results presented as the Marshall Lectures at the University of Cambridge in May 1987. Other comments came from Jose Pablo Arellano, Korkut Boratav, Jose Maria Fanelli, Roberto Frenkel, Bill Gibson, Butch Montes, Jose Antonio Ocampo, Michael Roemer, Jaime Ros, Pronob Sen, Andres Solimano, Rolph van der Hoeven, Richard Webb, and Tito Winograd. I have tried to do justice to them all. Finally, my wife, kids, and pets put up with the burdens of authorship with their usual grace. Mick, in particular, deserves a vote of thanks for spending many hours wedged between the globe, bookshelf, and PC, trying to figure out what was going on. He probably succeeded as well as did the author. WIDER Stabilization and Adjustment Policies and Programmes Country Studies 1 GHANA by Reginald H. Green 2 THE PHILIPPINES by Manuel F. Montes 3 NICARAGUA by Bill Gibson 4 KENYA by Rolph van der Hoeven and Jan Vandemoortele 5 TURKEY by Korkut Boratav 6 COLOMBIA by Jose Antonio Ocampo and Eduardo Lora 7 MEXICO by Nora Lustig and Jaime Ros 8 PERU by Richard Webb 9 EGYPT by Gouda Abdel-Khalek 10 CHILE by José Pablo Arellano, René Cortazar and Andrés Solimano 11 BRAZIL by Dionisio Carneiro 12 ARGENTINA by Jose Maria Fanelli, Roberto Frenkel and Carlos Winograd 13 INDIA by Pronab Sen 14 REPUBLIC OF KOREA by Alice H. Amsden 15 SRI LANKA by Lai Jayawardena, Anne Maasland and P. N. Radhakrishnan 16 IVORY COAST by Jacques Pegatienan Hiey 17 TANZANIA by Benno Ndulu CONTENTS PREFACE V WIDER COUNTRY STUDIES viii 1. Economic Stabilization in the Third World 1 2. Macroeconomic Shocks and the Social Matrix 7 2.1 Internal Shocks 9 2.2 External Shocks 16 2.3 Political Considerations and the Social Matrix 20 3. Stabilization Theory 25 3.1 Demand-Supply Balance 26 3.2 Price-Cost Relationships 38 3.3 The Balance of Payments 47 3.4 Financial Markets 55 3.5 Other Markets, Black and Grey 66 3.6 A Checklist for Stabilizations 68 4. Country Experiences 75 4.1 Externally Strangled Small, Open Economies 76 4.2 Foreign Bonanzas, Short and Long Run 94 4.3 Redistribution and Liberalization Experiments 109 4.4 Heterodox Shocks 121 4.5 Two Special Cases 133 4.6 A Scorecard on Stabilizations 142 5. How Stabilization Can Be Made to Work Better 147 5.1 Theses on Bretton Woods 148 5.2 Financial Programming 154 5.3 Improving the Methodology 159 5.4 Other Perspectives 164 5.5 Questions of Strategy 168 REFERENCES 171 INDEX 177 1 Economic Stabilization in the Third World Early this century, William James published the thoughts on religion which suggested this essay’s theme. James was concerned to show that diverse religious experiences all probe a common well of sub- conscious spiritual strength.
Load more

Recommended publications
  • Development of the Polak Model
    DEVELOPMENT OF THE POLAK MODEL WIOLETTA NOWAK INTRODUCTION Macroeconomic stability is very important for each economy because it constitutes the basis of sustainable economic growth and development. It means stable prices with a low level of inflation, a stable foreign exchange rate and balance of payments. The most important institution that provides financial support to countries which have problems with internal and external stability is the International Monetary Fund (IMF). Credits are issued after an analysis of the causes of internal and external deficits. The IMF approach to macroeconomic stabilization is based on a monetary approach to the balance of payments. The first IMF model designed for dealing with balance of payments disequilibrium was the Polak model on monetary programming. This model yields a policy package that must be implemented by countries receiving support. In other words, the Polak model is used as the foundation of the IMF’s credit arrangements. The model can be modified in various ways. The aim of this paper is to show the main modifications of the Polak model and their implications for the relevant fiscal and monetary policies. 1. THE POLAK MODEL J.J. Polak presented his model in 1957 in a paper titled Monetary Analysis of Income Formation and Payments Problems.1 The model indicates what macroeconomics policies are required to achieve a given set of outcomes. In other words, it determines policy targets consistent with explicit macroeconomic objectives. The standard Polak model is simple, with a very limited number of variables. It was designed to be usable in every developing country.2 It is therefore very compact, with minimum data requirements.
    [Show full text]
  • The Polak Model: an Application
    Chapter 7 WORKSHOP 5 The Polak Model: An Application Since the early 1950s, economists and policymakers have been increas- ingly preoccupied with the problems of inflation and balance of pay- ments disequilibria. Their preoccupation has led to new approaches to monetary analysis.1 In this period, there has been a gradual evolution of the so-called monetary approach to the balance of payments, the third major approach; the two best-known earlier approaches are the elasticity (neoclassical) approach and the income absorption (neo- Keynesian) approach.2 1 M. W. Holtrop, "Method of Monetary Analysis Used by De Neder- landsche Bank," Staff Papers, Vol. 5 (February 1957), pp. 303-15; Paolo Baffi, "Monetary Analysis in Italy," Staff Papers, Vol. 5 (February 1957), pp. 316— 22; Ralph A. Young, "Federal Reserve Flow-of-Funds Accounts," Staff Papers, Vol. 5 (February 1957), pp. 323-41; Earl Hicks, Graeme S. Dorrance, and Gerard R. Aubanel, "Monetary Analyses," Staff Papers, Vol. 5 (February 1957), pp. 342-433; and Harold M. Knight, "A Monetary Budget," Staff Papers, Vol. 7 (October 1959), pp. 210-23. 2 Of several attempted reconciliations of the elasticity and absorption approaches, particular mention may be made of S. C. Tsiang, "The Role of Money in Trade Balance Stability: Synthesis of the Elasticity and Absorption Approaches," American Economic Review, Vol. 51 (December 1961), pp. 912-36. 154 ©International Monetary Fund. Not for Redistribution The Polak Model: An Application—Workshop 5 It has often been pointed out that each of the three approaches could in principle produce the right answers if it were correctly applied, that is to say, if proper allowance were made for all the repercussions throughout the economy of the change whose effect is being analyzed.
    [Show full text]
  • In Praise of Polak, but Fifty Years Is Enough Ben Fine
    G-24 Policy Brief No. 12 In Praise of Polak, But Fifty Years Is Enough Ben Fine It is fifty years since Jean-Jacques Polak published world level) or that output is fixed (at full his classic article “Monetary Analysis of Income employment). In practice, not without justification, Formation and Payments Problems” in the IMF financial programming is heavily associated with the Staff Papers. This paper provided the theoretical ideology of monetarism because of the pessimistic basis for the IMF’s financial programming, and stance taken on productive potential. continues to do so today. This is remarkable in and It has targeted balance of payments and/or of itself. The world economy has gone through fiscal deficits with shifting instruments across major changes over this period, as have countries and over time as fixed exchange rates corresponding fashions within economic theory as have given way to floating exchange rates, and triumphant Keynesianism gave way to varieties of control of inflation and liberalization of money monetarism in the wake of the collapse of the post- markets have been emphasized more or less to suit. war boom. Today, for example, the IMF is more likely to We also have had fifty years of development advise appreciation of the exchange rate to bring economics, during which there have also been down inflation in middle-income countries than to shifting and competing perspectives from address foreign or fiscal deficits, although these modernization through the Washington consensus remain a priority for low-income countries, and beyond, to notions of the developmental state, especially in Africa.
    [Show full text]
  • Peru: Monetary and Exchange Rate Policies, 1930-1980
    3 9. Sources of Base Money Growth, 1945–1949 ......................................................................23 10. Velocity of Money & Private Sector Credit Growth, 1942–1958 .....................................24 11. Exchange Rates, Jan 1949–June 1950 ...............................................................................25 12. Savings – Investment Balance ...........................................................................................27 13. Total Imports and Real Exchange Rate Index, (1934=100) ..............................................35 14. Cost of Living & Nominal Exchange Rate, 1950–59 ........................................................35 15. Sources of Base Money Growth, 1950–59 ........................................................................37 16. Velocity of Money & Private Sector Credit Growth, 1959–1969 .....................................39 17. RER Index & Average Monthly Imports, 1957–1968 .......................................................44 18. Sources of Base Money Growth, 1962–1967 ....................................................................45 19. Economic Growth & Inflation Rates, 1968–1980 .............................................................47 20. Total Imports and Real Exchange Rate Index (Index, 1934=100) ....................................50 21. Sources of Base Money Growth, 1969–74 ........................................................................52 22. Monthly Exchange Rate Devaluation, Jan. 1977–Dec. 1980 ............................................55
    [Show full text]
  • Prologue to a Biography
    Notes Preface and Acknowledgements 1. R. Skidelsky, ‘Introduction’, John Maynard Keynes, Vol. 3: Fighting for Britain 1937–1946 (Macmillan Papermac, 2000), p. xxii. 1 The Caribbean in Turmoil: Prologue to a Biography 1. Lewis Archive, Princeton, Box 1/10; ‘Autobiographical Account’ by Sir Arthur Lewis, prepared for Nobel Prize Committee, December 1979, p. 4. 2. Lewis (1939), p. 5. In the 1920s, the white population in St Lucia and on average across the islands, was relatively low, at about 3 per cent of the population. The proportion was higher than this on islands completely dominated by sugar cultivation, such as Barbados. 3. Lewis (1939), p. 7. On the significance of colour gradations in the social and power structures of the West Indies, see ‘The Light and the Dark’, ch.4 in James (1963) and Tignor (2005) notes: ‘In place of the rigid two-tiered racial system, there had appeared a coloured middle class … usually light skinned, well educated, professional and urban … To this generation, Lewis … belonged’ (p.11). 4. Lewis (1939), p. 5. 5. Lewis (1939), p. 9. 6. The total value of exports from St Lucia fell from £421,000 (£8.10 per cap- ita) to £207,000 (£3.91) between 1920 and 1925, and to £143,000 (£2.65) by 1930 (Armitage-Smith, 1931, p. 62). 7. These data derive from Sir Sydney Armitage-Smith’s financial mission to the Leeward Islands and St Lucia in the depths of the depression in 1931 – undertaken while Lewis was serving time in the Agricultural Department office waiting to sit his scholarship exam.
    [Show full text]
  • 14469-9781462367689.Pdf
    STAFF PAPERS PETER HOLE Chair, Editorial Committee lAN S. McDoNALD Editor and Deputy Chair MARINA PRIMORAC Assistant Editor Editorial Committee F. Charles Adams Malcolm D. Knight Mario I. Blejer Pau 1 R. Masson David Burton Donald J. Mathieson Daniel A. Citrin Susan M. Schadler David J. Goldsbrough Subhash M. Thakur Peter Isard Howell H. Zee G. Russell Kincaid Among the responsibilities of the International Monetary Fund, as set fonh in its Anicles of Agreement, is the obligation to "act as a centre for the collection and exchange of information on monetary and financial problems." Staff Papers makes available to a wider audience papers prepared by the members of the Fund staff. The views presented in the papers are those of the authors and are not to be interpreted as necessarily indicating the position of the Executive Board or of the Fund. To facilitate electronic storage and retrieval of bibliographic data. StaffPapers has adopted the subject classification scheme developed by the Journal of Economic Literature. Subscription: US$54.00a volume or the approximate equivalent in the currencies of most countries. Four numbers constitute a volume. Single copies may be purchased at $18.00. Individual academic rate to full-time professors and students of universities and colleges: $27 a volume. Subscriptions and orders should be sent to: International Monetary Fund Publication Services 700 19th Street. N.W. Washington, D.C. 20431, U.S.A. Telephone: (202) 623-7430 Telefax: (202) 623-7201 Internet: [email protected] ©International Monetary Fund. Not for Redistribution INTERNATIONAL MONETARY FUND STAFF PAPERS Vol. 42 No. 4 DECEMBER 1995 ©International Monetary Fund.
    [Show full text]
  • A Macroeconometric Model for the Economy of Lesotho: Policy Analysis and Implications
    University of Pretoria etd – Matlanyane, A R (2005) A MACROECONOMETRIC MODEL FOR THE ECONOMY OF LESOTHO: POLICY ANALYSIS AND IMPLICATIONS By RETSELISITSOE ADELAIDE MATLANYANE Submitted in partial fulfillment of the requirements for the degree DOCTOR OF PHILOSOPHY (ECONOMICS) in the FACULTY OF ECONOMICS AND MANAGEMENT SCIENCES at the UNIVERSITY OF PRETORIA PRETORIA MARCH 2005 University of Pretoria etd – Matlanyane, A R (2005) ACKNOWLEDGEMENTS I would like to express my sincere gratitude to a number of people and institutions without whose contributions this work would not have been accomplished. My supervisors, Prof. Reneé van Eyden and Prof. C. B. Du Toit for having provided guidance and invaluable support towards this work. I greatly appreciate their contributions and comments and am highly indebted to them. I am indebted to the African Economic Research Consortium, the National University of Lesotho and the Government of Lesotho for the financial support provided throughout my studies. I wish to also express my sincere gratitude to Prof. Hassan for the support he provided in many ways. I also wish to extend my thanks to Mr. Foulo and Mr. Masenyetse of the Central Bank of Lesotho for their contributions by way of assisting in the data collection process and providing required material. This work would not have been possible without the support and encouragements of all my peers and friends. I extend profound gratitude to Ms. Koaatsa. Special thanks also to Ms. Makhetha, Mrs. Semuli and Mr. Fisseha. I also wish to thank Mr. Sichei for his technical support. I am grateful for the extraordinary lengths he would go to be of assistance to me.
    [Show full text]
  • The Polak's Macroeconomic Monetary Model
    THE POLAK’S MACROECONOMIC MONETARY MODEL Branko Grcic, Ph.D. Faculty of Economics Split Radovanova 13, HR-21000 Split – CROATIA Phone: (385) 21 366 033; Fax: (385) 21 366 026 [email protected] ABSTRACT The Polak’s macroeconomic monetary model reflecting the monetary approach to the balance of payments was developed in the International Monetary Fund (IMF). Its purpose is to integrate monetary, income and balance of payments analysis, and it became the basis of the conditionality applied to IMF credits. The dynamic nature of the Polak’s monetary model, in contrast to most academic monetary models of the balance of payments, yields not only the final equilibrium value of the endogenous variables but also the time path toward these values. This makes the model particularly suitable for presentation and manipulation in system-dynamic notation. Based on the original mathematical form of the Polak’s monetary model we constitute the causal loop diagram, first of the basic model and then the extended, goal oriented model variant. Based on the causal structure we also form the corresponding flow diagram of the model in POWERSIM notation. Polak’s model is especially suitable for operative application in IMF financial programming missions in developing countries. Since Croatia is one of these countries, it is chosen as a case to test applicability and validity of the system-dynamic version of Polak’s extended monetary model. The model parameters are calibrated and validity of the model is tested on the basis of data for the period of 1994-1996 (based on the quarterly data). Keywords: macroeconomic, Polak’s monetary model, financial programming, system- dynamic simulation, POWERSIM 1.
    [Show full text]
  • Discussion Papers
    dp/14/2000 DISCUSSION PAPERS Implementation inBulgaria) Evaluation ofTheirEffective (Analysis ofTheoretical Approaches and the Bank World International and Monetary Fund Macroeconomic Modelsofthe BULGARIAN NATIONALBANK October 2001 Victor Yotzov Victor DISCUSSION PAPERS Editorial Board: Chairman: Garabed Minassian dp/14/2000 Members: Roumen Avramov Georgi Petrov Secretary: Lyudmila Dimova © Bulgarian National Bank, October 2001 ISBN 954 ≠ 9791 ≠ 50 ≠ 5 Printed in BNB Printing Center. Views expressed in materials are those of the authors and do not necessarily reflect BNB policy. Send your comments and opinions to: Publications Division Bulgarian National Bank 1, Alexander Battenberg Square 1000 Sofia, Bulgaria Tel.: 9145/1271, 1351, 1906 Fax: (359 2) 980 2425 e-mail: [email protected] Website: www.bnb.bg 2 Discussion Papers Contents 1. The IMF Approach ........................................................................... 6 2. The World Bank Approach ............................................................ 12 3. The IMF and World Bank Merged Model ...................................18 Prices and Output ........................................................................... 19 Monetary Sector ............................................................................. 19 External Sector................................................................................ 20 4. Criticism of Applied Approaches .................................................. 22 5. Evaluation of the Results from Implemented Adjustment Programs
    [Show full text]
  • IMF Lending and Poverty in Developing Countries Eleftherios Makedonas1 Sotirios Bellos2 Subasat Turan3 DOI 10.1515/Jheec‐2015‐0015
    JOURNAL OF HETERODOX ECONOMICS IMF Lending and Poverty in Developing Countries Eleftherios Makedonas1 Sotirios Bellos2 Subasat Turan3 DOI 10.1515/jheec‐2015‐0015 Abstract: An arduous debate has developed around the question of whether the multiple IMF’s ‘stabilization’ interventions in developing countries have actually met one of the most important of its initial programmatic goals, i.e., the provision of resources to members, with a view to eliminating temporary Balance of Payments maladjustments, avoiding at the same time destroying ‘national or international prosperity’. More importantly, there have been many voices claiming that these programs have rather accentuated poverty than alleviated it. We explore this claim both theoretically and empirically. Our results show an unequivocal negative relationship between IMF lending and poverty in the developing world. Keywords: IMF, Monetarism, poverty, Human Development Index, Infant Mortality Rate. JEL Classification: E51, E630, O190. 1 University of Macedonia, e‐mail: [email protected] 2 University of Macedonia, e‐mail: [email protected] 3 Izmir University of Economics, e‐mail: [email protected] Year 2015, Volume 2, Issue 2 Page:113 www.jheec.com Eleftherios Makedonas, Sotirios Bellos, Subasat Turan – IMF Lending and Poverty in Developing Countries 1. Introduction The International Monetary Fund (IMF) was established in 1944 as a mechanism for ensuring exchange rate stability. According to its Article of Agreement, IMF’s initial objectives were to facilitate the expansion and balanced growth of international trade, to promote exchange rate stability among its members, and to make its resources temporarily available to them, under adequate safeguards, so that they correct existing maladjustments in their balance of payments.
    [Show full text]
  • A Macroeconometric Model of the Chinese Economy
    Department of Economics A Macroeconometric Model of the Chinese Economy Duo Qin, Marie Anne Cagas, Geoffrey Ducanes, Xinhua He, Rui Liu, Shiguo Liu, Nedelyn Magtibay-Ramos and Pilipinas Quising Working Paper No. 553 March 2006 ISSN 1473-0278 A Macroeconometric Model of the Chinese Economy Duo QINa,c,*, Marie Anne CAGAS a, Geoffrey DUCANESa, Xinhua HEb, Rui LIUb, Shiguo LIUb, Nedelyn MAGTIBAY-RAMOSa, Pilipinas QUISINGa aAsian Development Bank (ADB) bInstitute of World Economics & Politics (IWEP), Chinese Academy of Social Sciences (CASS) cQueen Mary, University of London January 2006 Abstract This paper describes a quarterly macroeconometric model of the Chinese economy. The model comprises household consumption, investment, government, trade, production, prices, money, and employment blocks. The equilibrium-correction form is used for all the behavioral equations and the general→simple dynamic specification approach is adopted. Great efforts have been made to achieve the best possible blend of standard long-run theories, country-specific institutional features and short-run dynamics in data. The tracking performance of the model is evaluated. Forecasting and empirical investigation of a number of topical macroeconomic issues utilizing model simulations have shown the model to be immensely useful. JEL classifications: C51; E17 Keywords: Macroeconometric model; Chinese economy; forecasts; simulations * Corresponding author: D. Qin, email: [email protected] . 1. Introduction This paper outlines key features of the ADB China model, which is adapted and augmented from China_QEM, a quarterly macroeconometric model built by the Institute of World Economics and Politics (IWEP), Chinese Academy of Social Sciences (CASS).1 First started in early 2004, model adaptation and augmentation has taken more than a year due primarily to the inherent difficulty in modeling such a highly vibrant economy as well as major revisions in China’s historical data, in particular the revision on the GDP sectoral components in early 2005.
    [Show full text]
  • Da0>1 Economic Development Institute of the World Bank
    T&d /99k dA0>1 Economic Development Institute of The World Bank Public Disclosure Authorized Public Disclosure Authorized AN E PAE NME 44, Public Disclosure Authorized Public Disclosure Authorized AN EDI SEMINAR PAPER * NUMBER 44 i , ,,s *> jSU- EDI SEM1NAR PAPER * No. 44 Analytical Approaches to Stabilization and Adjustment Programs Cadman Atta Mills Raj Nallari The World Bank Washington, D. C. 03 1992 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing July 1992 The Economic Development Institute (EDI) was established by the World Bank in 1955 to train officials concemed with developmentplanning, policymaking, investment analysis, and project implementation in member developing countries. At present the substance of the EDI's work emphasizes macroeconomic and sectoral economic policy analysis. Through a variety of courses, seminars, and workshops,most of which are given overseas in cooperation with local institutions, the EDI seeks to sharpen analytical skills used in policy analysis and to broaden understanding of the experience of individual countries with economic develop- ment. Although the EDI's publications are designed to support its training activities, many are of interest to a much broader audience. EDI materials, including any findings, interpre- tations, and conclusions, are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. Because of the informality of this series and to make the publication available with the least possible delay, the manuscript has not been edited as fully as would be the case with a more formal document, and the World Bank accepts no responsibility for errors.
    [Show full text]