We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in …nancial markets. We embed this view in a standard model of the …nancial accelerator and explore its empirical and policy implications. In particular, we show how the model can account for: (i) a gradual and protracted expansionary phase followed by a sudden and sharp reces...

Studies of dynamic economic models often rely on each agent having a smooth value function and a well-defined optimal strategy. For time-homogeneous optimal control problems with a one-dimensional diffusion, we prove that the corresponding value function must be twice continuously differentiable under Lipschitz, growth, and non-vanishing-volatility conditions. Under similar conditions, the valu...

PurposeWe respond to some challenges in the transition to Sustainable Development Goals by examining the correlations between mobile and inclusive development (quality of growth, poverty and inequality) in 93 developing countries for the year 2011. Design/methodology/approachMobile money service entails: ‘mobile used to pay bills’ and ‘mobile used to receive/send money’. Interactive Ordinary Le...

We construct a Schumpeterian growth model of a common market with following properties. Households can stay as workers or become researchers at some cost. Workers are employed in production and researchers in R&D. Workers are unionized. A larger common market means a wider variety of products and more intensive goods market competition. The main findings are as follows. If the common market is ...

We introduce endogenous probability of survival in the standard Keynes-Ramsey optimal growth model. An individual’s probability of survival is assumed to be dependent on past levels of consumption. Endogenous probability of survival effectively also implies that the rate of time preference (or degree of patience) of an individual is no longer an exogenously given parameter. We solve the dynamic...

We analyze the relative growth performance of open economies in a two-country model where di¤erent endowments of labor and a natural resource generate asymmetric trade. A resource-rich economy trades resource-based intermediates for …nal manufacturing goods produced by a resource-poor economy. Productivity growth in both countries is driven by endogenous innovations. The e¤ects of a sudden incr...

China has been considered as such a successful example of enhancing economic growth by massive infrastructure investments in the past decades. A recent paper by Shi and Huang (2014) indicates a very big positive return of public infrastructure in China during 1995-2011 using China’s provincial-level data. However, the literature has provided con‡icting empirical results on the productivity e¤ec...

The issue of convergence has been hotly debated since the mid 1980s. Only recently certain consensus has arisen around some of the most fundamental issues. It seems hardly surprising, then, to find a large variation in how those issues are taught to undergraduates. This paper is an attempt at clarifying the different concepts of convergence, and their relation to both the neoclassical model of ...

Spatial Determinants of Productivity: Analysis for the Regions of Great Britain* This Paper uses NUTS3 sub-regional data for Great Britain to analyse the determinants of spatial variations in income and productivity. We decompose the spatial variation of earnings into a productivity effect and an occupational composition effect. For the former (but not the latter) we find a robust relationship ...

The productivity e¤ect of public infrastructure investment is controversial in the traditional literature using aggregate production function estimation, mainly due to reverse causality. This paper develops a new approach, using a model of endogenous productivity in a …rm-level production function, and matching Chinese …rm-level production data with province-level infrastructure data. The estim...