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How Useful is Growth Literature for Policies in the Developing Countries?

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Abstract

This paper examines the growing gap between the theoretical and empirical growth literature and policy needs of the developing economies. Growth literature has focused mainly on long term growth outcomes, but policy makers of the developing economies need rapid improvements in the short to medium term growth rates; see Pritchett (2006). In this paper we argue that this gap can be reduced by distinguishing between the short to medium term dynamic effects of policies from their long run equilibrium effects. With data from Singapore, Malaysia and Thailand, we show that an extended version of the Solow (1956) model is well suited for this purpose. We find that the short to medium term growth effects of the investment ratio are quite significant and they may persist for up to 10 years.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow065431.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp09-09.

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Length: 39 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:uow:depec1:wp09-09

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Keywords: Solow Growth Model; Endogenous Growth; Dynamic Growth Effects of Investment Ratio; Policies for Developing Countries.;

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  1. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  2. Neil R. Ericsson & James G. MacKinnon, 2000. "Distributions of Error Correction Tests for Cointegration," Econometric Society World Congress 2000 Contributed Papers 0561, Econometric Society.
  3. Luintel, Kul B & Khan, Mosahid & Arestis, Philip & Theodoridis, Konstantinos, 2008. "Financial Structure and Economic Growth," Cardiff Economics Working Papers E2008/3, Cardiff University, Cardiff Business School, Economics Section.
  4. Rao, B. Bhaskara & Singh, Rup & Kumar, Saten, 2008. "Do we need time series econometrics?," MPRA Paper 6627, University Library of Munich, Germany.
  5. Greiner, Alfred & Semmler, Willi, 2002. "Externalities of investment, education and economic growth," Economic Modelling, Elsevier, vol. 19(5), pages 709-724, November.
  6. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  7. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
  8. Greenwood, Jeremy & Krusell, Per, 2007. "Growth accounting with investment-specific technological progress: A discussion of two approaches," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1300-1310, May.
  9. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June.
  10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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