Imports and Growth in Highly Indebted Countries: An Empirical Study

ISBN-13: 9783642467721 / Angielski / Miękka / 2012 / 209 str.

Jesko Hentschel

Opis

A real imports of capital and intermediate goods declined sharply for highlyindebted countries in the 1980s, these economies were faced with the need tosubstitute previously imported factors of production with domestic capital and labor. The study empirically analyzes the degree of import dependence of twelve developing countries. Estimates of the short-run elasticity of substitution characterize both imported capital and intermediate goods to behave like complements in the production process in the developing countries. Long-run substitution elasticites differ considerably among the group of economies, especially for imported machinery and equipment. The results indicate that inward-oriented strategies have not achieved the aim of reducing the import dependence of the developing economies. In order to visualize theimplications of the differing degree of import dependence, a partial equilibrium econometric model is used to analyze the reaction of the trade account on external shocks and domestic policies in Columbia and Ecuador. Simulations show that the dependence on imported production means can transform an "adjustment with growth" of the external account intoan "adjustment or growth" controversy.

Spis treści

1. Introduction.- 1.1. The debt crisis, imports, and growth.- 1.2. Structure of the study.- 2. The importance of imported factors of production in developing countries.- 2.1. Introductory remarks.- 2.2. The composition of imports.- 2.3. Factors impeding perfect import substitutability.- 2.3.1. Non-traded specific factors.- 2.3.2. Technology.- 2.3.3. Adjustment costs and time.- 2.4. Capital goods.- 2.4.1. Nature of capital goods production.- 2.4.1.1. Technological requirements.- 2.4.1.2. Market size.- 2.4.1.3. Economies of scale and specialization.- 2.4.2. Weight and structure of the capital goods sector.- 2.4.3. Imports and domestic production of capital goods.- 2.4.4. An assessment.- 2.5. Intermediate goods.- 2.5.1. Primary intermediate goods.- 2.5.2. Industrial intermediate goods.- 2.5.2.1. Nature of production.- 2.5.2.2. Imports and domestic production of industrial intermediate goods.- 2.5.3. An assessment.- 2.6. Development strategies and the role of imports.- 2.6.1. Inward- versus outward-oriented policies.- 2.6.2. Effects of inward-oriented policies.- 2.6.3. Secondary import substitution.- 2.6.4. Independence or vulnerability?.- 2.7. Summary.- 3. Import models: issues and problems.- 3.1. Introduction.- 3.2. The theoretical background: imports and growth.- 3.2.1. Perfect substitutability for imports in open economy growth models.- 3.2.2. Perfect complementarity in production.- 3.2.3. Limited substitutability.- 3.3. The standard import function, foreign exchange availability, and disaggregate import analyses.- 3.3.1. The standard import function.- 3.3.2. Foreign exchange and the external budget restriction.- 3.3.3. Disaggregate import analyses.- 3.4. Empirical studies of imports as factors of production in developing countries.- 3.4.1. Models positing a specific elasticity of substitution for imported inputs.- 3.4.1.1. Trade-gap models.- 3.4.1.2. Models positing a limited substitutability.- 3.4.2. Models that allow estimation of the elasticity of substitution.- 3.4.2.1. CES functions including imports.- 3.4.2.2. The translog approach.- 3.4.2.3. Derived import demands from CES and translog functions: a comparison.- 3.5. Concluding remarks.- 4. Macroeconomic production functions and elasticities of substitution between imported and domestic factors of production.- 4.1. Introduction.- 4.2. Aggregate production functions and the elasticity of substitution.- 4.2.1. The aggregation problem.- 4.2.2. The elasticity of substitution ex post and ex ante.- 4.2.3. Factors influencing the elasticity of substitution between imported and domestic factors of production.- 4.3. The nested production function.- 4.3.1. Disaggregation of imports.- 4.3.2. A three-level nested CES function.- 4.3.3. The optimal composition of the efficiency capital stock.- 4.3.4. Optimal production of gross output.- 4.4. Summary.- 5. Estimation of elasticities of substitution between domestic and imported means of production.- 5.1. Introductory remarks.- 5.2. Measurement of the domestic price of imported goods.- 5.2.1. The domestic price of imported goods.- 5.2.2. Derivation of a protection proxy.- 5.2.3. Foreign exchange availability and the internal price of imported goods.- 5.3. Imported and domestically produced capital goods.- 5.3.1. The stochastic equation.- 5.3.2. Reference estimations.- 5.3.2.1. Data and parameter assumptions.- 5.3.2.2. Estimation of the regression parameters.- 5.3.2.3. Estimation of the structural parameters.- 5.3.3. Modification 1: the depreciation rate.- 5.3.4. Modification 2: an alternative formulation of the user cost of capital.- 5.3.5. Modification 3: using gross domestic investment data.- 5.3.5.1. Conceptual aspects of the data.- 5.3.5.2. Data generation.- 5.3.5.3. Regression results.- 5.3.6. Modification 4: modelling the foreign exchange impact.- 5.3.6.1. The estimating equation.- 5.3.6.2. Measuring foreign exchange availability.- 5.3.6.3. Regression results.- 5.3.7. Comparison of estimated elasticities.- 5.4. Imported intermediate goods.- 5.4.1. The stochastic equation.- 5.4.2. Estimation using the protection proxy.- 5.4.2.1. Data employed.- 5.4.2.2. Estimation of the regression parameters.- 5.4.2.3. Non-linear estimation of the structural parameters.- 5.4.3. Foreign exchange availability.- 5.4.3.1. The estimating equation.- 5.4.3.2. Regression results.- 5.5. Summary and interpretation of the empirical results.- 5.5.1. Summary of the empirical results.- 5.5.2. Interpretation of the empirical results.- 6. Imports, growth, and the trade balance: two case studies.- 6.1. Basic remarks about the framework.- 6.2. The Columbian model.- 6.2.1. Econometric specification.- 6.2.1.1. Factor demands, price equations, and the demand for other imports.- 6.2.1.2. Export demand and supply.- 6.2.2. Ex post simulation.- 6.2.3. Analyses of trade balance reactions.- 6.3. The Ecuadorian model.- 6.3.1. Econometric specification.- 6.3.1.1. Factor demands, price equations, and the demand for other imports.- 6.3.1.2. Export supply and demand.- 6.3.2. Ex post simulation.- 6.3.3. Analyses of trade balance reactions.- 6.4. Concluding remarks about the simulations.- 7. Conclusion.- 7.1. Summary of findings.- 7.2. Import vulnerability reconsidered.- Appendices.- A. Statistical tables.- B. The cost function and conditional factor demands for a CES production function.- B.1. Derived factor demands.- B.2. The cost function.- C. Data sources and computational notes.- C.1. Industrial production and price statistics.- C.2. Trade data.- C.3. National income accounting statistics.- C.4. Specific variables used in Chapter 5.- C.4.1. Implicit average effective import taxes.- C.4.2. Real import capacity.- C.4.3. Interest rates.- C.5. Variable defmitions and sources, Chapter 6.- C.6. Computational notes.- References.