Innovations in Macroeconomics (eBook)

Table of Contents 11
A. Globalization, Specialization and Innovation Dynamics 17
A.1 Introduction 17
A.2 Approaches in Modern Macroeconomics 19
A.3 Human Capital, Physical Capital and Innovations in Open Economies 23
A.4 A Critique of the Heckscher-Ohlin-Samuelson Approach 27
A.5 Solving the Leontief Paradox? 30
A.6 Variations on the Solow Model: Some New Insights for a Monetary Economy 36
A.7 Technological Progress and the Long Run Price Level 50
A.8 Foreign Direct Investment and Innovation 82
A.9 Output Dynamics: Interaction of the Demand Side and the Supply Side 97
A.10 Growth Accounting Under Unemployment and Okun’s Law 99
A.11 Innovation, Trade and Foreign Investment 102
A.12 Conclusions 108
Appendix A.1: Aggregation in a Two-Sector Growth Model: A Modified Solow Approach with Cobb- Douglas Production Functions 110
Appendix A.2: Two Sector Model (KHAN/BILGINSOY, 1994) 114
Appendix A.3: Labor Markets with Tradables and Nontradables 115
Appendix A.4: Product Innovations with Schumpeterian Intermediate Products: A Simple Formula 118
Appendix A.5: Medium-term Output and Wage Policies in an Open Economy 119
B. Savings, Investment and Growth: New Approaches for Macroeconomic Modelling 124
B.1 Introduction 124
B.2 A Medium-term Keynes-Solow Model 126
B.3 Conclusions and Possible Extensions 140
C. Economic Integration, Technological Progress and Growth 143
C.1 Rich Countries vs. Poor Countries and Economic Integration 143
C.2 Set-up of the Model 146
C.3 Asymmetric Foreign Direct Investment in a Two-Country Growth Model 152
C.4 Policy Conclusions 154
Appendix C.1: Basic Neoclassical Model 156
Appendix C.2: General Approach and Simulations 156
D. Impact of the Real Exchange Rate on Trade, Structural Change and Growth 160
D.1 Introduction 160
D.2 Reputation, Market Size and Relative Price Effects: A Quasi- Balassa- Samuelson Effect 161
D.3 Real Exchange Rate Dynamics and Economic Effects 164
D.4 Real Effective Exchange Rate (p/ep*) Dynamics in Selected EU Countries 172
D.5 Wages, Prices and the Real Exchange Rate 172
D.6 Towards an Integrated Macroeconomic Approach 173
D.7 Medium Term Approach to Product Innovations, Output and the Exchange Rate 179
D.8 Economic Catching-up and Long Term Real Exchange Rate Dynamics 186
D.9 Policy Implications 190
E. Macroeconomic Aspects of Opening up, Unemployment, Growth and Transition 192
E.1 Introduction 192
E.2 Growth, Trade and Innovation 194
E.3 Growth, Resource Dynamics, Balassa-Samuelson Effects and Unemployment 204
E.4 Product Innovation and Macroeconomic Developments: Schumpeter and the Mundell- Fleming Model 213
E.5 Conclusions and Policy Implications 215
Appendix E.1: Maximization of Total Quasi-Income of Workers through Trade Unions ( labor supply Lo is exogenous, parameter 0 0 0 0 1) 217
Appendix E.2: Mathematical Appendix 220
Appendix E.3: Reflections on EU Eastern Enlargement 222
Appendix E.4: Fiscal Multiplier in a Hybrid Approach 228
Appendix E.5: Reconsidering Aggregate Output in a Two-Sector Approach 229
F. Productivity Shocks, Innovations, Stock Market Dynamics and Growth 231
F.1 Introduction 231
F.2 Traditional and New Approaches to the Exchange Rate and Stock Market Dynamics 236
F.3 Hybrid Model: Combining Interest Parity and Augmented Money Market Equilibrium 249
F.4 Capital Asset Pricing Model and Product Innovations 251
F.5 Consumption, Volatility and Growth 255
F.6 Policy Issues and Conclusions 257
Appendix F.1: Slope of Equilibrium Lines 259
Appendix F.2: International Bonds Market Integration, Interest Rates and Stock Market Volatility 260
G. Innovation Dynamics and Optimum Growth 264
G.1 Introduction 264
G.2 Endogenous Growth, Innovation and Maximum Consumption per Capita 267
G.3 Policy Implications 282
Appendix G.1: Optimum Quantity of Money 284
Appendix G.2: Specialization, Technological Progress and Factor Price Ratios 285
Appendix G.3: Endogenous Progress in the Capital Goods Sector 286
Appendix G.4: Simple Differential Equation and Bernoulli Differential Equation 288
Appendix G.5 The Macroeconomic Foundation of Microeconomics 290
H. Trade, Structural Change and Growth in an Open Monetary Economy 291
H.1. Introduction 291
H.2. Exchange Rate Dynamics, Relative Prices, Employment and Growth 293
H.3 Real Exchange Rate Dynamics and Economic Effects 308
Appendix H.1: Statistical Measures of Structural Change 311
Appendix H.2: Indicators Measuring Structural Change 313
I. Innovations in the Digital Economy: Promotion of R& D and Growth in Open Economies
I.1 Introduction 314
I.2 Innovations and New Economic Structures in the Digital Economy 317
I.3 Theory of Innovation Policy 340
I.4 Policy Conclusions 349
Appendix I.1: Optimum Product Innovation under Uncertainty 355
Appendix I.2: Product Innovations and Network Effects in a Simple Model 356
Appendix I.3: NACE (EU classification) rev. 1.1 Classification at the 2- digit level ( in parts) 360
Appendix I.4: Market Entry of Digital Good Producers in a General Equilibrium Model 360
J. EU Innovation Policy: Analysis and Critique 367
J.1 Introduction 367
J.2 Innovation Policy in the EU 369
J.3 Innovation Dynamics in OECD Countries 370
J.4 Recommendations for Future EU Innovation Policy 384
K. Financial Market Integration, Interest Rates and Economic Development 387
K.1 Introduction 387
K.2 Financial Market Integration in the EU 394
K.4 Policy Conclusions 406
K.5 FDI and Information and Communication Technology in the Dornbusch Model 408
Appendix K.1: Aspects of Transition and Trend Growth in a Setup with Technology Shifts 421
Appendix K.2: Uncertainty, Savings and Product Innovations 421
Appendix K.3: A Macro-Model with Unemployment and Endogenous Taxation 423
L. Natural Resources, Oil Prices and Innovation Dynamics 426
L.1 Introduction 426
L.2 Theory of Natural Resource Pricing 431
L.3 Oil Price Regression Analysis 441
L.4 Policy Implications 447
L.5 Sustainability Issues 449
Appendix L.1: Data Sources 455
References 456
List of Figures 465
List of Tables 470