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Economic Growth Effects Of An International Crisis

Author

Listed:
  • OSCAR AFONSO

    (Universidade do Porto, Faculdade de Economia, OBEGEF and NIFIP, Rua Roberto Frias 4200-464 Porto, Portugal)

  • RUI HENRIQUE ALVES

    (Universidade do Porto, Faculdade de Economia, OBEGEF and NIFIP, Rua Roberto Frias 4200-464 Porto, Portugal)

Abstract

We develop a general equilibrium endogenous growth model where final goods are produced in either the exporter sector or the importer sector, in order to analyze the short, medium and long-run growth effects of an external demand shock induced by an international crisis, such as the current one. Depending on the policy response, such a shock might (or might not) severely affect competitiveness, wage inequality, the economic growth rate and the technological-knowledge bias. This bias controls the paths towards the new steady state. The model shows that countries with balanced public finances can accommodate the external shock and that the intervention should be prompt, as the delay is costly. Results appear to be supported by empirical evidence.

Suggested Citation

  • Oscar Afonso & Rui Henrique Alves, 2015. "Economic Growth Effects Of An International Crisis," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 60(02), pages 1-16.
    • Handle: RePEc:wsi:serxxx:v:60:y:2015:i:02:n:s0217590815500125
    DOI: 10.1142/S0217590815500125
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    References listed on IDEAS

    as
    1. Mr. Chris Papageorgiou & Mr. Andrew Berg & Ms. Catherine A Pattillo & Mr. Nikola Spatafora, 2010. "The End of An Era? the Medium- and Long-Term Effects of the Global Crisison Growth in Low-Income Countries," IMF Working Papers 2010/205, International Monetary Fund.
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    More about this item

    Keywords

    External demand shock; economic growth; public accounts; competitiveness; wages; C63; J31; O31;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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