Capital formation is a key driver of the growth of potential output. With continuing widespread capital controls and persistently small inward FDI the volume of capital formation in India is constrained by domestic saving. The national saving rate in India (the sum of the saving rates of...

This article provides an overview of recent research into the macroeconomic costs and benefits of monetary unification. We are primarily interested in Europe’s monetary union. Given that unification entails the loss of a policy instrument its potential benefits have to be found elsewhere....

This paper surveys the recent literature on the theory of macroeconomic policy. We study the effect of various incentive constraints on the policy-making process, such as lack of credibility, political opportunism, political ideology, and divided government. The survey is organized in three...

Harberger’s superneutrality conjecture contends that, although in theory the mix of direct and indirect taxes affects investment and growth, in practice tax policy is ineffective as an instrument to promote growth. This paper provides evidence to support this view by examining the predictions...

This paper examines the relationship between trade and income convergence by focusing on groups of countries comprising major trade partners. The majority of these groups exhibited significant convergence. Furthermore, a comparison of the trade-based groups with different, randomly selected,...

Many countries, both industrialized and developing, appear to have experienced a slowdown in economic growth. We examine a large sample of countries and find that a majority exhibit a significant structural break in their post-war growth rates. In nearly all of these cases the break was followed...

This paper builds on earlier evidence showing that, while most countries exhibit little evidence of unconditional income convergence, countries that trade heavily with one another tend to exhibit a much higher incidence of convergence. Two alternative explanations for the trade-related...

Recent literature has documented the sensitivity of unit root tests to failure to account for structural change. This paper reconsiders international evidence on the unit root hypothesis while allowing for two structural breaks. We find evidence of two breaks in three-quarters of the data,...

This paper focuses on the question of income convergence among countries. While the methodology used to determine convergence differs from the common cross-sectional approach, it corroborates Baumol's finding of a convergence club among the world's wealthiest countries. It also shows that there...

For decades, the prevailing sentiment among economists was that growth rates remain constant over the long run. Kaldor considered this to be one of the six important `stylized facts' that theory should address, and until the emergence of endogenous growth models, this was a fundamental feature...