The Impact of the Credit Crisis on Poor Developing Countries and the Role of China in Pulling and Crowding Us Out
We show that the credit crisis of OECD countries has a negative impact on the growth of the world economy according to an error correction model including China and Australia. This causes negative growth effects in poor developing countries. The reduced growth has a direct or indirect impact on the convergence issue, aid, remittances, labour force growth, investment and savings, net foreign debt, migration, tax revenues, public expenditure on education and literacy. We estimate dynamic equations of all these variables using dynamic panel data methods for a panel of countries with per capita income below $1200 (2000). The estimated equations are then integrated to a dynamic system of thirteen equations for thirteen variables that allows for highly non-linear baseline simulations for these open economies. Then we analyze the effects of transitional shocks as predicted by the international organizations for the OECD and world growth for 2008 and 2009. Whereas growth rates return to the baseline scenario until 2013 with overshooting for China and Australia, the level of the GDP per capita shows permanent effects, which are positive only for China. In the poor countries, investment, remittances, savings, tax revenues, public expenditure on education, all as a share of GDP as well as literacy and the GDP per capita, are reduced compared to the baseline until 2087 where our analysis ends. Investment, emigration and labour force growth start returning to baseline values between 2013 and 2017. GDP per capita and tax revenues start returning to baseline around 2040. Education variables do not return to baseline without additional effort. Significantly positive short-run effects (the lagged growth rates) show that China has an impact on Australia, which has an impact on the OECD, which in turn affects the rest of the world. ROW has a significantly positive feedback effect on China.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 616, 6200 MD Maastricht|
Phone: (31) (0)43 3883875
Fax: (31) (0)43 3216518
Web page: http://www.merit.unu.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hristos Doucouliagos & Martin Paldam, 2006.
"Aid Effectiveness on Accumulation: A Meta Study,"
Wiley Blackwell, vol. 59(2), pages 227-254, 05.
- Ziesemer, Thomas, 2009. "Remittances, lagged dependent variables and migration stocks as determinants of migration from developing countries," MERIT Working Papers 007, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Timothy J. Hatton & Jeffrey G. Williamson, 2003.
"Demographic and Economic Pressure on Emigration out of Africa,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 105(3), pages 465-486, 09.
- Timothy J. Hatton & Jeffrey G. Williamson, 2001. "Demographic and Economic Pressure on Emigration Out of Africa," NBER Working Papers 8124, National Bureau of Economic Research, Inc.
- Hatton, Timothy J. & Williamson, Jeffrey G., 2001. "Demographic and Economic Pressure on Emigration out of Africa," IZA Discussion Papers 250, Institute for the Study of Labor (IZA).
- Faini, Riccardo & Venturini, Alessandra, 1994. "Migration and Growth: The Experience of Southern Europe," CEPR Discussion Papers 964, C.E.P.R. Discussion Papers.
- Naude, Wim, 2009. "The Financial Crisis of 2008 and the Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Simeon Djankov & José Garcia Montalvo & Marta Reynal-Querol, 2005.
"The curse of aid,"
Economics Working Papers
870, Department of Economics and Business, Universitat Pompeu Fabra.
- El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
- Timmer, Marcel P. & Szirmai, Adam, 2000. "Productivity growth in Asian manufacturing: the structural bonus hypothesis examined," Structural Change and Economic Dynamics, Elsevier, vol. 11(4), pages 371-392, December.
- Stark, Oded & Bloom, David E, 1985. "The New Economics of Labor Migration," American Economic Review, American Economic Association, vol. 75(2), pages 173-78, May.
- Dilek Cinar & Frédéric Docquier, 2004. "Brain drain and Remittances: implications for the source country," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 47(1), pages 103-118.
- Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
- Adams, Richard H. Jr., 2007.
"International remittances and the household : analysis and review of global evidence,"
Policy Research Working Paper Series
4116, The World Bank.
- Richard H. Adams, 2006. "International Remittances and the Household: Analysis and Review of Global Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 396-425, December.
- Carlos Vargas-Silva, 2007. "Measuring the macroeconomic impact of workers' remittances in a data-rich environment," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(6), pages 359-363.
- Christine Mutz & Thomas Ziesemer, 2008.
"Simultaneous estimation of income and price elasticities of export demand, scale economies and total factor productivity growth for Brazil,"
Taylor & Francis Journals, vol. 40(22), pages 2921-2937.
- Mutz Christine & Ziesemer Thomas, 2005. "Simultaneous Estimation of Income and Price Elasticities of Export Demand, Scale Economies and Total Factor Productivity Growth for Brazil," Research Memorandum 004, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
- Friedrich Schneider & Dominik Enste, 2000.
"Shadow Economies Around the World; Size, Causes, and Consequences,"
IMF Working Papers
00/26, International Monetary Fund.
- Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
- Niimi, Yoko & Ozden, Caglar, 2006. "Migration and remittances : causes and linkages," Policy Research Working Paper Series 4087, The World Bank.
- Giuliano, Paola & Ruiz-Arranz, Marta, 2009.
"Remittances, financial development, and growth,"
Journal of Development Economics,
Elsevier, vol. 90(1), pages 144-152, September.
- Marta Ruiz-Arranz & Paola Giuliano, 2005. "Remittances, Financial Development, and Growth," IMF Working Papers 05/234, International Monetary Fund.
- Giuliano, Paola & Ruiz-Arranz, Marta, 2006. "Remittances, Financial Development, and Growth," IZA Discussion Papers 2160, Institute for the Study of Labor (IZA).
- Peter Pedroni, 1999.
"Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors,"
Department of Economics Working Papers
2000-02, Department of Economics, Williams College.
- Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
- Hineline, David R., 2008. "Parameter heterogeneity in growth regressions," Economics Letters, Elsevier, vol. 101(2), pages 126-129, November.
- repec:idb:brikps:publication-detail,7101.html?id=25235 is not listed on IDEAS
- Bertoli Simone, 2006. "Remittances and the Dynamics of Human Capitalin the Recipient Country," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200607, University of Turin.
- Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
- Ronald Skeldon, 2008. "International Migration as a Tool in Development Policy: A Passing Phase?," Population and Development Review, The Population Council, Inc., vol. 34(1), pages 1-18.
- Anna Mayda, 2010.
"International migration: a panel data analysis of the determinants of bilateral flows,"
Journal of Population Economics,
Springer;European Society for Population Economics, vol. 23(4), pages 1249-1274, September.
- Mayda, Anna Maria, 2007. "International Migration: A Panel Data Analysis of the Determinants of Bilateral Flows," CEPR Discussion Papers 6289, C.E.P.R. Discussion Papers.
- Anna Maria Mayda, 2007. "International migration: A panel data analysis of the determinants of bilateral flows," CReAM Discussion Paper Series 0707, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
- Dalia S Hakura & Ralph Chami & Peter J Montiel, 2009. "Remittances; An Automatic Output Stabilizer?," IMF Working Papers 09/91, International Monetary Fund.
- Krishna Mazumdar, 2005. "Socio-economic factors determining adult literacy in developing countries," International Journal of Social Economics, Emerald Group Publishing, vol. 32(1/2), pages 98-120, January.
- Miguel D. Ramirez & Hari Sharma, 2009.
"Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis,"
Estudios Economicos de Desarrollo Internacional,
Euro-American Association of Economic Development, vol. 9(1).
- Ramirez, Miguel D. & Sharma, Hari, 2008. "Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis," Working Papers 51, Yale University, Department of Economics.
- Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005.
"Are Immigrant Remittance Flows a Source of Capital for Development?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 52(1), pages 55-81, April.
- Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Working Papers 03/189, International Monetary Fund.
- Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
- Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 1999.
"What Drives Private Saving Across the World?,"
Working Papers Central Bank of Chile
47, Central Bank of Chile.
- Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank.
- Rapoport, Hillel & Docquier, Frédéric, 2005.
"The Economics of Migrants’ Remittances,"
IZA Discussion Papers
1531, Institute for the Study of Labor (IZA).
- Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2007.
"What is the impact of international remittances on poverty and inequality in Latin America ?,"
Policy Research Working Paper Series
4249, The World Bank.
- Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2008. "What is the Impact of International Remittances on Poverty and Inequality in Latin America?," World Development, Elsevier, vol. 36(1), pages 89-114, January.
- Hatton, Timothy J & Williamson, Jeffrey G, 2002. "Out of Africa? Using the Past to Project African Emigration Pressure in the Future," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 556-73, August.
- Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
- Bardhan, Pranab K & Lewis, Sydney, 1970.
"Models of Growth with Imported Inputs,"
London School of Economics and Political Science, vol. 37(148), pages 373-85, November.
- Marcelo Soto, 2009.
"System GMM Estimation With A Small Sample,"
UFAE and IAE Working Papers
780.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Marianna Belloc & Giancarlo Gandolfo, 2005. "The Current Account - Interest Rate Relation as a Nonlinear Phenomenon," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(2), pages 145-166.
- Rob Vos & Marco V. Sánchez, 2009. "Impact of the global crisis on the achievement of the MDGs in Latin America," Working Papers 74, United Nations, Department of Economics and Social Affairs.
- Naude, Wim & Fosu, Augutin, 2009. "Africa.s Recovery from the Global Economic Crisis," Working Paper Series WIDER Angle newsletter Ju, World Institute for Development Economic Research (UNU-WIDER).
- Carlos Vargas-Silva & Peng Huang, 2005.
"Macroeconomic Determinants of Workers’ Remittances: Host vs. Home Country’s Economic Conditions,"
0507007, EconWPA, revised 29 Jul 2005.
- Carlos Vargas-Silva & Peng Huang, 2006. "Macroeconomic determinantsof workers' remittances: Hostversus home country's economic conditions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 81-99.
- Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
- Francisco Rodríguez, 2006. "Cleaning Up the Kitchen Sink: On the Consequences of the Linearity Assumption for Cross-Country Growth Empirics," IDB Publications (Working Papers) 47218, Inter-American Development Bank.
- Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
- Nakamura, Alice & Nakamura, Masao, 1998. "Model specification and endogeneity," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 213-237.
- Todaro, Michael P, 1969. "A Model for Labor Migration and Urban Unemployment in Less Developed Countries," American Economic Review, American Economic Association, vol. 59(1), pages 138-48, March.
- Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
- Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2010004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ad Notten)
If references are entirely missing, you can add them using this form.