Reda Cherif

Tourism Specialization and Economic Development: Evidence from the Unesco World Heritage List

The present paper investigates whether tourism specialization is a viable strategy for development. We estimate standard growth equations augmented with a variable measuring tourism specialization using instrumental variables techniques for a large cross-section of countries for the period 1980-2002. We introduce an instrument for tourism based on the UNESCO World Heritage List. We find that there is a positive relationship between the extent of tourism specialization and economic growth. An increase of one standard deviation in the share of tourism in exports leads to about 0.5 percentage point in additional annual growth, everything else being constant. Our result holds against a large array of robustness checks.

The Leap of the Tiger: How Malaysia Can Escape the Middle-Income Trap

Only a few European economies and Korea and Taiwan Province of China reached high-income status during 1970-2010. Malaysia’s real income per capita increased to 26 percent of the U.S. level in 2010 from 20 percent in 1970. Despite relatively strong growth and a substantial improvement in export sophistication, Malaysia’s total factor productivity lagged behind that of Korea and Taiwan Province of China. We argue that what characterizes their experience in contrast to Malaysia’s is the creation of technologies by domestic firms and a push to leapfrog to the technological frontier at an early stage of development.

The Volatility Trap: Why Do Big Savers Invest Relatively Little?

The more a country saves, the less it invests as a share of saving. We build a “store-or-sow” model of growth with precautionary saving and investment to study the nonlinear relationship between investment and saving. We contend that income volatility is an important variable for explaining saving and investment dynamics. Our results indicate that as permanent volatility increases, both investment and saving increase until a threshold at which point investment plummets while precautionary saving surges. In contrast, with larger volatility of temporary shocks, investment falls and precautionary saving gradually increases. Faced with high permanent volatility, big savers invest relatively little.

Development Accounting and the Rise of TFP

The paper presents evidence that the contribution of differences in total factor productivity (TFP) to income differences across countries steadily increased between 1970 and 2000. We verify that our finding is neither imputable to measurement errors in input factors nor dependent on the assumption of factor neutral differences in technology. We conclude that theories explaining cross-country income differences based on institutions or on forces that are constant over time, such as geography or legal origin, should be reconsidered in the light of their consistency with the rise of the explanatory power of TFP.

Public Debt Dynamics and Debt Feedback

We study the dynamics of U.S. public debt in a parsimonious VAR. We find that including debt feedback ensures the stationarity of debt while standard VARs excluding debt may imply an explosive debt path. We also find that the response of debt to inflation or interest shocks is not robust and depends on the policy regime. The recent past suggests that a positive shock to inflation increases debt while the same to interest rate decreases it. Positive shocks to growth and primary surplus unambiguously reduce debt.

Sharp Instrument: A Stab at Identifying the Causes of Economic Growth

We shed new light on the determinants of growth by tackling the blunt and weak instrument problems in the empirical growth literature. As an instrument for each endogenous variable, we propose average values of the same variable in neighboring countries. This method has the advantage of producing variable-specific and time-varying—namely, “sharp”—and strong instruments. We find that export sophistication is the only robust determinant of growth among standard growth determinants such as human capital, trade, financial development, and institutions. Our results suggest that other growth determinants may be important to the extent they help improve export sophistication.

Riding the Energy Transition : Oil Beyond 2040

Recent technological developments and past technology transitions suggest that the world could be on the verge of a profound shift in transportation technology. The return of the electric car and its adoption, like that of the motor vehicle in place of horses in early 20th century, could cut oil consumption substantially in the coming decades. Our analysis suggests that oil as the main fuel for transportation could have a much shorter life span left than commonly assumed. In the fast adoption scenario, oil prices could converge to the level of coal prices, about

Stochastic Trends, Debt Sustainability and Fiscal Policy

15 per barrel in 2015 prices by the early 2040s. In this possible future, oil could become the new coal.

Oil Exporters’ Dilemma: How Much to Save and How Much to Invest

We study empirically the reaction of fiscal policy to changes in the permanent and transitory components of GDP in a panel of countries. We find evidence that government spending tends to be counter-cyclical conditional on temporary shocks and pro-cyclical conditional on permanent shocks. We also find no evidence that developing countries are systematically different from developed ones in terms of fiscal policy. We present a theory featuring a fiscal reaction function to the output gap and a measure of debt sustainability. The fiscal impulse response to a permanent (temporary) shock to GDP is positive (negative) as the effect on debt sustainability (current output gap) dominates. The results are mostly sensitive to the relative weight of debt sustainability in the fiscal reaction function as well as to the extent of real rigidities in the economy.