Growth and Development in the Global Economy
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Growth and Development in the Global Economy

Edited by Harry Bloch

What are the forces behind the increasing globalization of economic life? How does globalization affect the functioning of national economies? What difficulties confront government policymakers in dealing with the global economy? These issues are addressed in this volume by leading specialists. The contributors present a range of unique and varied perspectives from which they consider aspects of the increasing integration of economic life, exploring implications for the functioning of domestic markets in a rapidly changing global economy. The result is a collection of insights that provide a framework for understanding globalization as an economic phenomenon.
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Chapter 8: Cross-Country Evidence on the Link between Economic Volatility and Technical Progress

Sam Hak Kan Tang

Extract

8. Cross-country evidence on the link between growth volatility and technical progress* Sam Hak Kan Tang INTRODUCTION Volatility in economic growth is generally recognized as a ‘stylized fact’ in the development of many industrializing countries. A number of studies have noted that many countries lack persistence in growth. Easterly et al. (1993), Pritchett (1998), Rodrik (1998) and Easterly and Levine (2000) find growth rates are highly unstable over time for a large number of countries and for subsets of countries with specific characteristics and geographic locations. Moreover, the recent financial crises in Latin America and East Asia provide vivid examples of volatility in growth among the newly industrializing countries (NICs). On the contrary, some NICs, such as Hong Kong and Taiwan, experience remarkably steady growth over a long period of time. Why, then, do some countries experience relatively steady growth, while others suffer wild fluctuations? Despite the widespread observation of volatility in growth, business cycle volatility has received little attention from mainstream economic research. It has been regarded as a less important area of research than studying economic growth, and therefore has been relatively neglected in both empirical and theoretical research. Lucas (1987), for example, has suggested that understanding business cycle volatility has little value compared to understanding growth. However, the arrival of a new class of models that link growth, volatility and technical progress in the early 1980s has helped to revive interest in business cycle volatility. Kydland and Prescott (1982), Nelson and Plosser (1982) and Long and Plosser...

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