The Impact of the Credit Crisis on Poor Developing Countries: Growth, worker remittances, accumulation and migration

Ziesemer, Thomas (2009). The Impact of the Credit Crisis on Poor Developing Countries: Growth, worker remittances, accumulation and migration. UNU-MERIT.

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  • Author Ziesemer, Thomas
    Title The Impact of the Credit Crisis on Poor Developing Countries: Growth, worker remittances, accumulation and migration
    Publication Date 2009
    Publisher UNU-MERIT
    Abstract The credit crisis of OECD countries has a negative impact on the growth of the world economy according to a simple error correction model. This causes negative growth effects in poor developing countries. The reduced growth has a direct or indirect impact on the convergence issue, aid, remittances, labour force growth, investment and savings, net foreign debt, migration, tax revenues, public expenditure on education and literacy. We estimate dynamic equations of all these variables using dynamic panel data methods for a panel of countries with per capita income below $1200 (2000). The estimated equations are then integrated to a dynamic system of fourteen equations for fourteen variables that allows for highly non-linear baseline simulations for these open economies. Then we analyze the effects of shocks as predicted by the international organizations for the OECD and world growth for 2008 and 2009. Whereas growth rates return to the baseline scenario very quickly, the GDP per capita returns to its baseline level in OECD countries and the world economy after some years but in poor developing countries it remains below the baseline scenario for more than 200 years. This long run blow to convergence leads to more remittances and emigration, a lower labour force growth, higher shares of GDP for saving, tax revenues, public expenditure on education and investment, and higher literacy. However, all these stabilizing forces through remittances and emigration cannot compensate the losses in levels of growth. Short and medium run effects are driven by a return to baseline for OECD and world GDP growth rates by the end of 2010, but for levels only 10 to 30 years later. Therefore we first get 15 to 20 years of fewer remittances, tax revenues, savings, public expenditure on education, literacy, and investment, more emigration and lower labour force growth. JEL class.: F22, 24; G01, O15, J61.
    UNU Topics of Focus Migration
    Keyword Crisis
    Migration
    Remittances
    Accumulation
    Growth
    Copyright Holder UNU-MERIT
    Copyright Year 2009
    ISSN 1871-9872
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    Created: Wed, 11 Dec 2013, 16:35:45 JST