Chong K. Yip

Alternative Approaches To Money And Growth

This paper reexamines the issue of money and growth in an economy with both endogenous labor supply and endogenous capital stock using three recently developed approaches: the money-in-the-utility-function approach, the cash-in-advance approach, and the transactions-costs approach. By establishing a qualitative equivalence between alternative setups, the authors find economically justifiable conditions such that all comparative statics results derived.from the aforementioned approaches are identical. Copyright 1992 by Ohio State University Press.

Education, Economic Growth, and Brain Drain

This paper examines how brain drain may affect the growth rate, education, and income distribution of an economy. It shows that if the engine of growth of the economy is human capital accumulation and intergenerational externality, brain drain hurts the growth rate of the economy. Brain drain also has important income distribution and welfare implications. This paper argues that in addition to the static effects that have been analyzed in the existing literature, brain drain affects adversely the intertemporal welfare of the non-migrants in the present and future generations. The government may use a more aggressive education policy to counter the detrimental effects of brain drain on the economys growth rate. One option is to invest more in education, raising the educator-student ratio, but this policy also has important income distribution implications, as it tends to benefit skilled workers at the expense of unskilled workers.

Government Expenditure Financing in an Endogenous Growth Model: A Comparison

This paper develops a generalized cash-in-advance model of endogenous growth to assess the relative merits of money and income-tax financing of a constant share of government expenditure in GNP. The authors find that money financing (seigniorage) leads to higher growth and inflation rates, pointing out to a trade-off between growth and inflation. Nevertheless, they also find that the financing policy that maximizes welfare is, in general, a mix of the two methods, with the weights depending crucially on the fraction of investment purchases that are subject to the cash-in-advance constraint. Copyright 1995 by Ohio State University Press.

Fertility Choice and Economic Growth: Theory and Evidence

This paper examines a growth model with endogenous consumption, labor-leisure, and fertility. A fertility choice variable capturing both the quality and quantity of the family size enters the utility function positively but also generates time costs. Theoretical comparative dynamic results are derived for changes in exogenous production and utility parameters. Employing post-World War II U.S. data, the authors estimate the model using a structural vector autoregression with imposed long-run restrictions based on the theoretical predictions. The empirical results lend support to the endogeneity of fertility choice and present dynamic responses of each endogenous variable to employment, fertility, and output shocks. Copyright 1994 by MIT Press.

Examining the Long-Run Effect of Money on Economic Growth

Abstract Christiano and Ljungqvist (1988) find a statistically significant Granger-causal relation between money and output when data are measured in log levels, but not when they use data in log differences. To resolve this puzzle, we develop an endogenous growth model with money to study the long-run interactions between real and monetary sectors. Money is regarded as a Hicks-neutral technological factor that improves the efficiency of goods production. We examine the effects of anticipated inflation on the growth rates of real macroeconomic variables and find that money is “superneutral” in the growth rate sense.

Dynamics in a Transactions-Based Monetary Growth Model

This paper examines the dynamic properties of a monetary endogenous growth model in which money is introduced into the system via a transactions-cost technology. A monetary equilibrium that either satisfires the Friedman rule of the optimum quantity of money or accommodates the zero-inflation-rate policy is dynamically unstable. In a Cagan-like hyperinflationary environment, two possibilities arise: the monetary equilibrium may be unstable or exhibit dynamic indeterminacy in which a variety of equilibrium outcomes emerge in transition. The rate of monetary expansion, the relative magnitudes of the intertemporal elasticity of substitution and the production technological parameter are crucial for determining the stability property of the model. We characterize completely the transitional dynamics in the saddle-path case and generalize the basic model to allow for a convex production technology and an endogenous labor-leisure tradeoff to examine the robustness of the main findings.

Industrialization, Economic Growth, and International Trade

This paper analyzes the relationship between economic growth, industrialization, and international trade in a two-sector endogenous growth model. With learning-by-doing, the economy grows perpetually along a balanced growth path, with manufacturings relative price declining continuously. Under trade, its pattern of trade and growth will be affected by external growth. If it remains diversified under trade, its growth can keep in pace with the rest of the world. If the growth rate of the rest of the world is higher than a certain limit, the economy cannot catch up and will eventually produce agriculture only. Copyright 1999 by Blackwell Publishing Ltd.

Tariffs and exchange rate dynamics redux

Abstract This paper builds a two-country intertemporal macroeconomic model similar to one developed recently by Obstfeld and Rogoff. Imperfectly competitive producer/consumers maximize an intertemporal utility function with consumption, real money balances and output as arguments. We use the framework to examine both the short-run and steady-state effects of the imposition of a tariff in one of the countries. This results in a fall in the tariff imposers output in both the steady state and in the short run. A small tariff may make a country worse off (contrary to the usual result under perfect competition). Spillover effects are also considered.

The Gains from Trade for a Monetary Economy Once Again

The authors examine the effects of free trade on a small open economy within a dynamic generalized cash-in-advance model. They provide a complete characterization for the possibility of harmful trade and suggest alternative economic policies that can convert the loss associated with free trade into a gain. They authors also find, contrary to standard results, that there exists an optimal tariff for a small open economy, and they use calibration methods to assess its value.

Population Growth and Economic Growth: A Reconsideration

The relationship between population growth and development has long been a controversial topic in the economic development literature. Early work by Hoover and Coale and more recent work by Blanchet suggest that high fertility suppresses per capita income growth. However, recent work by Kelley and Srinivasan are ambivalent about such a neo-Malthusian relationship between population growth and economic growth. The authors examine these conflicting positions. They emphasize that the rates of both population growth and income growth are endogenous variables within a general equilibrium framework. An endogenous growth model with endogenous fertility is then developed. It is found that when all exogenous variables are controlled for, there exists an inverse relation between population growth and economic growth. However, when some exogenous factors change, such as an improvement in technological progress, the relation becomes ambiguous. This suggests that the conflicting findings in the literature may be because of the presence of substantial heterogeneity in unobserved variables across countries and over time in cross-country panel data sets.