Dutch Disease in Central and Eastern European Countries

Nagpal

South Asian Journal of Macroeconomics and Public Finance

2021

The current study attempts to examine the linkage between government (public) spending and economic growth in the broader framework of selected South Asian Nations (SANs), BRICS and other emerging nations by using two sets of empirical modelling over the period 2007–2016 by using inverted U-shaped hypothesis, propounded by Armey curve (1995). The first set has employed system GMM technique to explore the presence of the Armey curve hypothesis using the square term of government size, while the second set has used the threshold regression using system GMM panel modelling to investigate the subsequent reversals (tipping point). The key findings signify the existence of an inverted U-shaped relationship for the selected data set of emerging nations and, therefore, support the Armey curve hypothesis. The projected threshold (tipping) levels (as a percentage of GDP) are 24.31% for the government total expenditures (GTotExp), 12.92% for consumption spending (GConExp) and 7.11% for investment spending (GInvExp). It has been observed that a rise in the public spending (size) resulted in a substantial increase (decrease) in the growth rate when the public spending was before (after) the optimal threshold level, indicating a non-monotonic association. The findings of the study also suggest a policy implication that public spending could only be a short-term measure to deal with crises in any nation, but not a long-term solution. JEL Classification: C23, C33, E60, E62, H00, H50, O40, O50

Section: Review Of Related Studiesmentioning

confidence: 99%

Government Size and Economic Growth: An Empirical Examination of Selected Emerging Economies

Nagpal

South Asian Journal of Macroeconomics and Public Finance

2021

Latin American Perspectives

“…Existing economic models (e.g., Lucas, 1988; Romer, 1990; Mankiw, Romer, and Weil, 1992; Jones, 2005) have established the fact that human capital is essential to economic growth. In other words, a rise in the level of education and advances in general health conditions result in an increase in the contribution of human capital for aggregate output and the skills of workers in the production of new knowledge and the adoption of existing technology and thus in the potential growth of the economy (see Andrade, Simões, and Duarte, 2013; Andrade, Duarte, and Simões, 2018).…”

Section: Financialization and Inequality In Brazilmentioning

confidence: 99%

The Financialization of Health and Education and Inequality in Twenty-first Century Brazil

Bação,

Mazeron,

Simões

2023

Brazil is often cited for its high levels of inequality. Despite some success in reducing this inequality during the Partido dos Trabalhadores (Workers’ Party—PT) period, the rise of Jair Bolsonaro as Brazil’s president threatens to reverse this trend as he actively seeks to promote policies that will lead to greater financialization of the Brazilian economy. In recent years, several studies have shown that the financialization of the economy as a whole can lead to a rise in inequality, but the financialization of the health and education sectors has not been of particular interest to researchers and government officials. An empirical analysis of the pattern of income inequality in twenty-first-century Brazil paying particular attention to the potential impact of the financialization of health and education sectors on this process shows a correlation between greater financialization (especially in the health sector) and an increase in income inequality. O Brasil é frequentemente destacado pelos seus níveis elevados de desigualdade. Apesar de algum progresso na redução da desigualdade durante o período de governação do PT, a tomada de posse como presidente de Jair Bolsonaro ameaça reverter esta trajetória, nomeadamente via o apoio a uma maior financeirização da economia. Nos últimos anos, vários estudos mostraram que a financeirização da economia como um todo pode conduzir ao aumento da desigualdade. Porém, a financeirização dos setores da saúde e da educação não tem sido alvo de interesse particular. Uma análise empírica do comportamento da desigualdade no Brasil no séc. XXI salientando o potencial impacto da financeirização da saúde e da educação, sugere que uma maior financeirização, em particular do setor da saúde, está associada a um aumento da desigualdade na repartição do rendimento no Brasil.

Proceedings of the 14th Economics &Amp; Finance Conference, Lisbon

“…The term 'Dutch disease' was first used in 1977 (on November 26th) in an article in The Economist (1977) to describe the unfavorable effects on the manufacturing sector in the Netherlands following the discovery of natural gas during the 1960s (Andrade and Duarte, 2017). Because of this natural reserves discovery in the North Sea region of the Netherlands, the real exchange rate appreciation of the currency that followed the boom of natural gas export reduced the profitability of manufacturing and service exports causing reallocation of production resources and finally deindustrialization.…”

Section: Dutch Disease In Theory and Practicementioning

confidence: 99%

The Signs of Dutch Disease in Croatia

Beg¹,

Sertić²

2020

Croatia is the EU member specific by the highest share of tourism in GDP, making one-fifth of it. As tourism is prone to various external factors that are out of state control (clearly visible in the current coronavirus pandemic), along with its growing share in Croatia, the question of Dutch disease arises. The Dutch disease phenomenon refers to the state where one booming sector (e.g. natural resources, which are impersonated by tourism in this case) causes adverse effects on other sectors (e.g. manufacturing sector, industry) which finally leads to the decline in the economy's international competitiveness and deindustrialization. A core model of Dutch disease explains that a large inflow of foreign money will appreciate real exchange rate and cause both the spending and reallocation of resources between non-tradable and tradable sectors thus causing deindustrialization. The aim of this paper is to investigate whether the increasing tourism sector in Croatia has caused resource movement from other sectors towards the tourism sector which would confirm the presence of Dutch disease. Based on Croatian data in period 1995-2019 we conclude that (i) Croatia is highly specialized in tourism with (ii) tourism being a more important growth factor than industry and (iii) a highly important export category; also, (iv) there is a positive relationship between the tourism revenues growth and a number of employees in the tradable sector, and negative between the tourism revenues growth and a number of employees in the non-tradable sector; finally (v) the growth of tourism revenues did not lead to an appreciation of the real effective exchange rate. We conclude that Croatia is not sick with the Dutch disease but if the rapid growth of the tourism sector in Croatia continues, there could be negative effects of the Dutch disease in the future.