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Openness, Human Development, and Fiscal Policies; Effectson Economic Growth and Speed of Adjustment

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  • Delano Villanueva

Abstract

The model developed here postulates that learning through experience plays a critical role in raising labor productivity over time, with three major consequences. First, the steady-state growth rate (of output) becomes endogenous and is influenced by government policies. Second, the speed of adjustment to steady-state growth is faster, and enhanced learning further reduces adjustment time. Third, both steady-state growth and the optimal net rate of return to capital are higher than the sum of exogenous rates of technical change and population growth. Simulation results confirm the model’s faster speed of adjustment, while regression analysis explains a large part of divergent growth patterns across countries in terms of the extent of openness and human development and of the quality of fiscal policies.

Suggested Citation

  • Delano Villanueva, 1993. "Openness, Human Development, and Fiscal Policies; Effectson Economic Growth and Speed of Adjustment," IMF Working Papers 93/59, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:93/59
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    Cited by:

    1. Roberto Mariano & Delano Villanueva, 2005. "Sustainable External Debt Levels : Estimates for Selected Asian Countries," Macroeconomics Working Papers 22468, East Asian Bureau of Economic Research.
    2. Dilip Dutta & Nasiruddin Ahmed, 2004. "Trade liberalization and industrial growth in Pakistan: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1421-1429.
    3. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    4. Savvides, Andreas, 1995. "Economic growth in Africa," World Development, Elsevier, vol. 23(3), pages 449-458, March.
    5. Agenor, Pierre-Richard & Izquierdo, Alejandro & Fofack, Hippolyte, 2003. "The integrated macroeconomic model for poverty analysis : a quantitative macroeconomic framework for the analysis of poverty reduction strategies," Policy Research Working Paper Series 3092, The World Bank.
    6. Delano Villanueva, 1997. "Social and Political Factors in a Model of Endogenous Economic Growth and Distribution: An Application to the Philippines," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp57, April.
    7. Delano P. Villanueva & Roberto S. Mariano, 2007. "External Debt, Adjustment, and Growth," NBER Chapters,in: Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16, pages 199-221 National Bureau of Economic Research, Inc.
    8. Aurora Teixeira & Natércia Fortuna, 2003. "Human Capital, Innovation Capability and Economic Growth," FEP Working Papers 131, Universidade do Porto, Faculdade de Economia do Porto.
    9. Tarján, Tamás, 2011. "Egyenes vagy S alakú a Jánossy-féle trendvonal?. Hosszú távú egyensúlyi állapot Maddison adatai és az új növekedéselmélet tükrében
      [A simple or an S-shaped Jánossy trend?. A long-term state of equi
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 552-564.

    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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