IDEAS home Printed from https://ideas.repec.org/a/taf/intecj/v15y2001i1p115-139.html
   My bibliography  Save this article

Dynamics of Macroeconomic Adjustment with Growth: Some Simulation Results

Author

Listed:
  • Sushanta Mallick

Abstract

This paper examines the impact of several macroeconomic policies, both demand and supply management policies, on economic activity within a small macroeconomic simulation model. The model is based on a standard analytical framework that underlies adjustment policies in developing economies (Des). The standard approach has been to use aggregate government expenditure as an instrument of fiscal policy to shock economic activity in a DE, with a negative dynamic response typically observed. In the context of such a small macroeconomic simulation model we decompose government expenditure into consumption and investment expenditure. Simulation exercises with and without model-consistent expectations throw up some contrasting results in the sense that fiscal policy can influence output positively through the effects of public sector investment on private investment in a DE such as India. [F43, E62]

Suggested Citation

  • Sushanta Mallick, 2001. "Dynamics of Macroeconomic Adjustment with Growth: Some Simulation Results," International Economic Journal, Taylor & Francis Journals, vol. 15(1), pages 115-139.
  • Handle: RePEc:taf:intecj:v:15:y:2001:i:1:p:115-139
    DOI: 10.1080/10168730100000006
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730100000006
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/10168730100000006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    2. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    3. Khan, Mohsin S. & Knight, Malcolm D., 1982. "Some theoretical and empirical issues relating to economic stabilization in developing countries," World Development, Elsevier, vol. 10(9), pages 709-730, September.
    4. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    5. Anonymous, 1964. "International Monetary Fund," International Organization, Cambridge University Press, vol. 18(4), pages 872-873, October.
    6. Anonymous, 1964. "International Monetary Fund," International Organization, Cambridge University Press, vol. 18(4), pages 855-859, October.
    7. Anonymous, 1964. "International Monetary Fund," International Organization, Cambridge University Press, vol. 18(3), pages 616-621, July.
    8. Anonymous, 1964. "International Monetary Fund," International Organization, Cambridge University Press, vol. 18(1), pages 193-196, January.
    9. Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
    10. Ghani, Ejaz, 1991. "Rational expectations and price behavior : A study of India," Journal of Development Economics, Elsevier, vol. 36(2), pages 295-311, October.
    11. Mohsin S. Khan, 1990. "The Macroeconomic Effects of Fund-Supported Adjustment Programs," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 195-231, June.
    12. Kumar Mallick, Sushanta, 1993. "Capital Formation in Indian Agriculture: Recent Trends," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 48(4).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Combes, Jean-Louis & Minea, Alexandru & Sawadogo, Pegdéwendé Nestor, 2021. "Does the composition of government spending matter for government bond spreads?," Economic Modelling, Elsevier, vol. 96(C), pages 409-420.
    2. Sushanta K. Mallick, 2014. "Disentangling the Poverty Effects of Sectoral Output, Prices, and Policies in India," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 773-801, December.
    3. Zhang, Yin-Fang & Ji, Shengbao, 2018. "Does infrastructure have a transitory or longer-term impact? Evidence from China," Economic Modelling, Elsevier, vol. 73(C), pages 195-207.
    4. Makrelov, Konstantin & Arndt, Channing & Davies, Rob & Harris, Laurence, 2020. "Balance sheet changes and the impact of financial sector risk-taking on fiscal multipliers," Economic Modelling, Elsevier, vol. 87(C), pages 322-343.
    5. Mallick, Sushanta K., 2005. "Tight credit policy versus currency depreciation: Simulations from a trade and inflation model of India," Journal of Policy Modeling, Elsevier, vol. 27(5), pages 611-627, July.
    6. Marianna Belloc & Pietro Vertova, 2004. "How Does Public Investment Affect Economic Growth in HIPC? An Empirical Assessment," Department of Economics University of Siena 416, Department of Economics, University of Siena.
    7. Sushanta Mallick & Tomoe Moore, 2008. "Foreign Capital in a Growth Model," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 143-159, February.
    8. Germaschewski, Yin, 2020. "Stabilization policy, infrastructure investment, and welfare in a small open economy," Economic Modelling, Elsevier, vol. 84(C), pages 322-339.
    9. Dawood, Taufiq Carnegie & Francois, John Nana, 2018. "Substitution between private and government consumption in African economies," Economic Modelling, Elsevier, vol. 73(C), pages 129-139.
    10. Seyoum, Belay, 2006. "US trade preferences and export performance of developing countries: Evidence from the generalized system of preferences," International Business Review, Elsevier, vol. 15(1), pages 68-83, February.
    11. Sushil Kumar Haldar, 2009. "Economic Growth in India Revisited," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 10(1), pages 105-126, January.
    12. Sushanta Mallick, 2006. "Policy instruments to avoid output collapse: an optimal control model for India," Applied Financial Economics, Taylor & Francis Journals, vol. 16(10), pages 761-776.
    13. Mallick, Sushanta & Moore, Tomoe, 2005. "Impact of World Bank lending in an adjustment-led growth model," Economic Systems, Elsevier, vol. 29(4), pages 366-383, December.
    14. Combes, Jean-Louis & Delacote, Philippe & Combes Motel, Pascale & Yogo, Thierry Urbain, 2018. "Public spending, credit and natural capital: Does access to capital foster deforestation?," Economic Modelling, Elsevier, vol. 73(C), pages 306-316.
    15. Ranjan Kumar Mohanty, 2016. "Does Fiscal Deficit Crowd Out Private Corporate Sector Investment In India?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1201-1224, November.
    16. Gu, Yanwei & Guo, Jing & Liang, Xiao & Zhao, Yajun, 2022. "Does the debt-growth link differ across private and public debt? Evidence from China," Economic Modelling, Elsevier, vol. 114(C).
    17. Petrović, Pavle & Arsić, Milojko & Nojković, Aleksandra, 2021. "Increasing public investment can be an effective policy in bad times: Evidence from emerging EU economies," Economic Modelling, Elsevier, vol. 94(C), pages 580-597.
    18. Artatrana Ratha, 2012. "Twin Deficits or Distant Cousins? Evidence from India1," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 13(1), pages 51-68, March.
    19. Seyoum, Belay, 2007. "Trade liberalization and patterns of strategic adjustment in the US textiles and clothing industry," International Business Review, Elsevier, vol. 16(1), pages 109-135, February.
    20. Sushanta K. Mallick, 2002. "Determinants of long-term growth in India: a Keynesian approach," Progress in Development Studies, , vol. 2(4), pages 306-324, October.
    21. Brigitte Granville, 2006. "Integrating poverty reduction in IMF-World Bank Models," Working Papers id:502, eSocialSciences.
    22. Zhang, Lifeng & Ru, Yucong & Li, Jingkui, 2016. "Optimal tax structure and public expenditure composition in a simple model of endogenous growth," Economic Modelling, Elsevier, vol. 59(C), pages 352-360.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ana Kristel Lapid & Rogelio Mercado & Peter Rosenkranz, 2023. "Concentration in Asia's cross‐border banking: Determinants and impacts," Pacific Economic Review, Wiley Blackwell, vol. 28(2), pages 267-292, May.
    2. Nabi, Ijaz & Malik, Abdul & Hattari, Rabin & Husain, Turab & Shafqat, Adeel & Anwaar, Sana & Rashid, Ammar, 2010. "Economic growth and structural change in South Asia: miracle or mirage?," LSE Research Online Documents on Economics 36389, London School of Economics and Political Science, LSE Library.
    3. Anthony M. Solomon, 1983. "Toward a more resilient international financial system," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 7(Sum).
    4. Mr. James M. Boughton, 2002. "On the Origins of the Fleming-Mundell Model," IMF Working Papers 2002/107, International Monetary Fund.
    5. Şerife Özşahin & Gülbahar Üçler, 2017. "The Consequences of Corruption on Inflation in Developing Countries: Evidence from Panel Cointegration and Causality Tests," Economies, MDPI, vol. 5(4), pages 1-15, December.
    6. Ansari, S. A. & Khan, W., 2018. "Relevance of Declining Agriculture in Economic Development of South Asian Countries: An Empirical Analysis," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 10(2).
    7. Ryan Federo & Angel Saz‐Carranza, 2020. "A typology of board design for highly effective monitoring in intergovernmental organizations under the United Nations system," Regulation & Governance, John Wiley & Sons, vol. 14(2), pages 344-361, April.
    8. Doessel, Darrel & Valadkhani, Abbas, 2003. "The Demand for Current Public Expenditure in Fiji: Theory and Empirical Results," MPRA Paper 50392, University Library of Munich, Germany.
    9. Krasnopjorovs, Olegs, 2013. "Latvijas ekonomikas izaugsmi noteicošie faktori [Factors of Economic Growth in Latvia]," MPRA Paper 47550, University Library of Munich, Germany.
    10. John H. Boyd & David S. Dahl & Carolyn P. Line, 1983. "A primer on the International Monetary Fund," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 7(Sum).
    11. Lars Osberg & Andrew Sharpe, 2003. "Human Well-being and Economic Well-being: What Values Are Implicit in Current Indices?," CSLS Research Reports 2003-04, Centre for the Study of Living Standards.
    12. Mr. Ken Miyajima, 2007. "What Do We Know About Namibia’s Competitiveness?," IMF Working Papers 2007/191, International Monetary Fund.
    13. Kashif Munir & Shahzad Arshad, 2018. "Factor accumulation and economic growth in Pakistan: incorporating human capital," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 45(3), pages 480-491, March.
    14. Houck, James P., 1973. "Some Aspects Of Income Stabilization For Primary Producers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 17(3), pages 1-16, December.
    15. Acosta, Juan & Cherrier, Beatrice, 2018. "The transformation of economic analysis at the Federal Reserve during the 1960s," SocArXiv vdy2z, Center for Open Science.
    16. Karen Taylor & Craig Tipping & Adam McKissack, 2004. "IMF Quotas, Representation and Governance," Treasury Working Papers 2004-03, The Treasury, Australian Government, revised Nov 2004.
    17. Ilse Mintz, 1967. "Traditional versus Expansionist Views on Export Changes During Business Cycles," NBER Chapters, in: Cyclical Fluctuations in the Exports of the United States since 1879, pages 3-26, National Bureau of Economic Research, Inc.
    18. Sayeeda Bano, 2014. "An Empirical Examination of Trade Relations between New Zealand and China in the Context of a Free Trade Agreement," Working Papers in Economics 14/04, University of Waikato.
    19. James M. Boughton, 2003. "On the Origins of the Fleming-Mundell Model," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-1.
    20. James Heckman & Neil Hohmann & Jeffrey Smith & Michael Khoo, 2000. "Substitution and Dropout Bias in Social Experiments: A Study of an Influential Social Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 651-694.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:15:y:2001:i:1:p:115-139. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RIEJ20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.