Pensions: the impact of migrations and cross-border workers in a small open economy

2018 ◽  
Vol 18 (2) ◽  
pp. 247-270 ◽  
Author(s):  
MARION LABOURÉ
Keyword(s):  
Economic Growth ◽  
Open Economy ◽  
Pension System ◽  
Small Open Economy ◽  
Future Evolution ◽  
Cross Border ◽  
Age Pyramid ◽  
High Volatility ◽  
Set Up ◽  
The Impact

AbstractThe pension system brings challenges in many high-income countries. While the system was set up at the time of economic growth, policymakers are facing both economic slowdown and aging population. Moreover, there is an incentive mis-match between short to medium term popularity and re-election versus taking necessary decisions to affect long-term sustainability of the system. In a small open economy, the situation is further accentuated by high volatility driven by migrations and cross-borders workers. This paper aims to address the policymakers’ challenges and develops an innovative model, whose main contribution is the way it reflects the cross-border workers’ contribution and impact. Therefore, it allows to not only assess the state liabilities, but also the evolution of the age pyramid with a significant portion of new migrants and cross-border workers, considering the high volatility of workers. It also provides an approach to analyze issues at stake and remove decision biases faced by politicians through policy options and their impact under various economic scenarios. With the model in hand, we analyze three different scenarios for the future evolution of Luxembourg's pension system. In all three scenarios, the results reflect a significant imbalance of the pension system over time (to 2060), going from 1.6% of gross domestic product (GDP) surplus in the best scenario to 14.2% of GDP deficit in the worst scenario. The probability of this worst scenario is related with a worsening of the economic situation, with job destruction and a drop in economic growth impacting cross-border commuters and net migrations.

scholarly journals A chaotic economic growth model and the agricultural share of an output

2005 ◽  
Vol 50 (2) ◽  
pp. 207-216 ◽  
Author(s):  
Vesna Jablanovic
Keyword(s):  
Economic Growth ◽  
Growth Model ◽  
Open Economy ◽  
Agricultural Production ◽  
Small Open Economy ◽  
Total Output ◽  
Economic Growth Model ◽  
Stable Equilibria ◽  
Set Up ◽  
Parameter Values

The agricultural share of a total output generally declines in the process of economic growth. The major reason for this is that consumer demand for food increases only slightly with rising incomes. However, a small, open economy can overcome this constraint to the growth of agricultural production by expanding its net exports. The basic aim of this paper is to set up a chaotic growth model of the gross domestic product that is capable of generating stable equilibria, cycles, or chaos depending on parameter values.

scholarly journals The Impact of Price-Cost Competitiveness Factors on Economic Growth

2013 ◽  
Vol 13 (2) ◽  
pp. 63-76 ◽  
Author(s):  
Veronika Baranová
Keyword(s):  
Economic Growth ◽  
Open Economy ◽  
Slovak Republic ◽  
Small Open Economy ◽  
Cost Effective ◽  
Developed Countries ◽  
Time Frame ◽  
Labor Costs ◽  
Cost Competitiveness ◽  
The Impact

Abstract The aim of this study is to verify the assumption that price-cost competitiveness factors affect long-term economic growth in the sample countries. This analysis is based on the neoclassical growth model extended by human capital. Furthermore, variables reflecting the cost-competitiveness and cost-effective real exchange rate and unit labor costs were added to the model. The default is a panel regression methodology and related methods of data analysis. The sample consists of EU member states that meet the requirement of a small open economy and membership in the OECD. On the basis of this criterion, the following countries were selected: Belgium, Czech Republic, Denmark, Estonia, Ireland, Hungary, Netherlands, Austria, Slovenia and the Slovak Republic. Annual frequency in the time frame 1999-2010 is the reference period. This is shown by the analysis results in the case that the selected sample of countries with affordable cost factors appears to be significant. The selected indicators of competitiveness can be one of the prominent factors that influence economic growth in developed countries, yet they are not a fully sufficient and comprehensive source of growth factors in terms of competitiveness.

scholarly journals Analysis of monetary regulation of the investment sphere in the Republic of Belarus

2021 ◽  
Vol 107 ◽  
pp. 09001
Author(s):  
Marina Zelenkevich ◽  
Natallia Bandarenka
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Open Economy ◽  
Financial Stability ◽  
Developing Economies ◽  
Small Open Economy ◽  
Price Stability ◽  
Practical Implementation ◽  
The Republic ◽  
The Impact

The purpose of the article is to substantiate the possibility and necessity of the central bank’s monetary policy to stimulate investment and economic growth for developing economies on the example of the investment sphere and monetary policy in Belarus. It was determined that the impact of monetary regulation on investment and economic growth is achieved in the course of the central bank’s activities to maintain indicators of price and financial stability which reflect favourable conditions for investment. Price stability is achieved through the implementation of various central bank strategies such as targeting the exchange rate, money supply and inflation. These strategies are defined as the objectives of monetary policy. The article discusses the advantages of monetary regulation in comparison with fiscal regulation, and also contains an analysis of its practical implementation in the Republic of Belarus in the period 2000–2019. As a result of the study the economic and financial results of the strategies applied at different stages were determined, their consequences for the economy were substantiated, and the strategies that best affect the financial and economic indicators in the country were identified. For countries with a small open economy which includes Belarus maintaining price and financial stability is complemented by a set of measures to reduce the devaluation expectations of market entities and create a favorable foreign economic environment.

scholarly journals Does Monetary Policy Boost Economic Growth? The Case of Small Open Economy

2020 ◽  
Vol 11 (3) ◽  
pp. 216
Author(s):  
Javid Aliyev ◽  
Shahriyar Mukhtarov ◽  
Khanlar Haydarov ◽  
Murad Isgandarov
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Open Economy ◽  
Small Open Economy ◽  
Policy Tools ◽  
Integration Methods ◽  
Monetary Base ◽  
Long Run ◽  
The Impact

The main aim of this paper is to investigate the impact of monetary policy tools on economic growth in Azerbaijan during 2005-2018 using the Vector Error Correction Model (VECM). Also, different co-integration methods, namely, Johansen, DOLS, FMOLS and CCR were utilized for the robustness test. The outcomes of the different co-integration methods are consistent with one another and confirm the existence of long-run relationships among variables. Furthermore, the estimation results of VECM show that the monetary base and exchange rate have a positive and statistically significant impact on economic growth in the long-run, while the discount rate is insignificant. The paper concludes that the monetary base and exchange rate should be promoted by policymakers over other monetary policy tools during monetary policy implementation toward stimulating economic growth.

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

Economic Growth and Foreign Workers in ASEAN and Singapore

2012 ◽  
Vol 11 (3) ◽  
pp. 114-136 ◽  
Author(s):  
Shandre Mugan Thangavelu
Keyword(s):  
Open Economy ◽  
Wage Gap ◽  
Small Open Economy ◽  
Output Growth ◽  
Foreign Workers ◽  
Domestic Economy ◽  
Unskilled Workers ◽  
Market Trends ◽  
State Growth ◽  
The Impact

This paper studies the trends of foreign immigrants in Asia and their effect on the growth of the Singapore economy. The paper also discusses the key labor market trends and the rationale for foreign workers in a small open economy like Singapore. Further, the paper highlights key simulations of the impact of foreign immigrants on output growth and wage gap for the Singapore economy by using Thangavelu's (2011) dynamic general equilibrium model. The study accounts for the flow of skilled and unskilled foreign workers on (a) steady-state growth; (b) the wage gap between the skilled and unskilled workers; and (c) innovation capabilities of the domestic economy. Further, the model also accounts for the contribution of immigrants on the welfare of the domestic economy through the immigration surplus that will accrue to the domestic economy.

Interest Rate–Economic Growth Nexus Under Currency Board Operations

2021 ◽  
Vol 8 (1) ◽  
pp. 13-24
Author(s):  
Martinianus Tshimologo Tibinyane ◽  
Teresia Kaulihowa
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Impulse Response ◽  
Response Function ◽  
Open Economy ◽  
Small Open Economy ◽  
Impulse Response Function ◽  
Policy Instrument ◽  
Variance Decomposition ◽  
Currency Board

This paper analyses the effect of the prime interest rate as a monetary policy instrument to stimulate economic growth in Namibia, a small open economy that is constrained by currency board operations. A Vector Autoregressive Model (VAR) was used for the period 1980–2019. The result shows that Namibia’s prime interest rate has no significant effect on economic growth. This finding remains robust and consistent when impulse response function and variance decomposition are employed. The impulse response function indicates a shock on the prime interest rate exhibits an inverse relationship. However, this effect is insignificant in both short and long-run scenarios. The variance decomposition indicates that the prime interest rate has a strongly exogenous impact, implying it has a weak influence on GDP growth. Policy implication indicates that small open economies under currency board operations need to identify different policy responses to circumvent external shocks and addresses their development needs.

scholarly journals Mutual Fund Performance and the Impact of Superannuation and Financial Regulation

2018 ◽  
Author(s):  
James M. Cooper ◽  
Russell Gregory-Allen
Keyword(s):  
New Zealand ◽  
Mutual Funds ◽  
Open Economy ◽  
Mutual Fund ◽  
Financial Regulation ◽  
Positive Impact ◽  
Small Open Economy ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
The Impact

Financial innovation such as a new superannuation scheme can allow for broader participation in retirement savings by individuals, but might also impact existing investments. On the other hand, mutual fund regulation involves a balancing act between protecting investors, and allowing fund managers to exercise their skills. Some recent changes in the fund environment of New Zealand allows an examination of the impact on performance from those changes in a small, open economy. Using a sample of New Zealand mutual funds, we compared performance before and after the introduction of two significant changes in the financial environment of New Zealand. In 2007, a state-sponsored investment scheme called KiwiSaver was introduced, providing significant incentives for more and more New Zealanders to save. Participation was substantial, and by 2015 KiwiSaver funds under management had exceeded traditional open-end funds. At the time of KiwiSaver’s introduction, mutual fund regulations was quite lax, particularly in the area of financial disclosure. However, in 2013 a new law was introduced, substantially increasing the disclosure requirements for those funds participating in the KiwiSaver scheme. First we examined, the impact on the New Zealand mutual fund industry upon the introduction of KiwiSaver, and then on the introduction of the increased KiwiSaver regulations, in order to determine if these harmed the overall New Zealand mutual fund industry. We found that the New Zealand mutual funds which focused on New Zealand or Australian equities experienced some negative performance after the introduction of KiwiSaver, but the impact on the overall industry was not significant. We also found that the increased regulations had some positive impact on performance, particularly for those funds emphasising global equities.  

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