The degree of an economy’s monetization, which has an important implication on economic growth, can be affected by the conduct of monetary policy, financial sector reform, and episodes of financial crises. The paper finds that monetization--measured by the ratio of broad money to nominal...

Potential Output is a key factor for debt sustaintability analysis and for developing strategies for growth, but unfortunately it is an unobservable variable. Using three methodologies (production function, switching, and state-space), this paper computes potential output for CAPDR countries...

The 2008 crisis underscored the interconnectedness of the international business cycle, with U.S. shocks leading to the largest global slowdown since the 1930s. We estimate spillover effects across major advanced country regions in a structural VAR (SVAR) using pre-crisis data. Our new method...

This paper constructs a coincident indicator for the Gulf Cooperation Council (GCC) area business cycle. The resulting coincident indicator provides a reliable measure of the GCC business cycle; over the last decade, the GCC coincident index and the real GDP growth have moved closely together....

Under what conditions should grants be preferred to loans? To answer this question, we present a simple model à la Krugman (1988) and show that, for any given level of developmental assistance, the optimal degree of loan concessionality is positively associated with economic growth if countries...

The Houthakker-Magee effect implies that a country facing unfavorable income elasticities in trade must either grow at a slower rate than its trading partners or experience a trend worsening of its current account and/or depreciation of its real exchange rate. Krugman (1989) first documented the...

This paper analyzes the sources of Mexico's economic growth since the 1960s and compares various decompositions of historical growth into its trend and cyclical components. The role of the implied output gaps in the inflationary process is then assessed. Looking ahead, the paper presents...

The knowledge production function is central to R&D-based growth models. This paper empirically investigates the knowledge production function and intertemporal spillover effects using cointegration techniques. Time-series evidence suggests there are two long-run cointegrating relationships. The...

This paper reexamines the empirical relationship between financial development and economic growth. It presents evidence based on cross-section and panel data using an updated dataset, a variety of econometric methods, and two standard measures of financial development: the level of liquid...

This paper investigates the main postulations of the R&D based growth models that innovation is created in the R&D sectors and it enables sustainable economic growth, provided that there are constant returns to innovation in terms of R&D. The analysis employs various panel data techniques and...