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- The Impact of Globalization and Economic Freedom on Economic Growth: The Case of Latin American and Caribbean CountriesPublication . Santiago, Renato Filipe Barros; Fuinhas, José Alberto Serra Ferreira RodriguesIn this study, we examined the impacts of globalization and economic freedom on the economic growth of a group of 21 developing countries from Latin America and the Caribbean over a time span that ranges from 1996 to 2013. Since heteroscedasticity, contemporaneous correlation, first order autocorrelation and cross-sectional dependence were present in the panel, the dynamic Driscoll-Kraay was used. We have constructed two models, one with the globalization overall and another with the political, social, and economic dimensions of globalization. In a second stage, we also corrected the most worrying shocks that we noticed in these economies. In general, our results point that globalization has a positive impact on growth as also economic globalization, but not all of its dimensions have the same positive effects. Social globalization showed to have a negative impact on growth, and political globalization did not show any statistically significant effect. On the other hand, considering the results from our estimations we can also conclude that economic freedom has a negative impact on the economic growth of our sample. The effects of globalization and economic freedom seem only to be noticed in the long-run, only economic globalization, when we do not correct for shocks, and electric power consumption, in all estimations, shows to have short and long-run effects on growth. Finally, the negative and significant coefficient of the error correction mechanism in all estimations point to the presence of cointegration/long-memory relationships between the variables.
- Is the Latin American and Caribbean capital stock affecting the development of the region?Publication . Santiago, Renato Filipe Barros; Fuinhas, José Alberto Serra Ferreira Rodrigues; Marques, António Manuel CardosoAccording to the conclusions of the reports of several international institutions, such as the International Monetary Fund, the Latin American and Caribbean region has suffered from a lack of investment in physical capital in recent decades. This is especially true if one looks at both the levels and the state of their infrastructures. As might be expected, this is not a desirable situation, mainly because, according to the same reports, it can give rise to several harmful effects on the economies of this region. That said, it is natural that there is less and less doubt about the fact that in order to promote the development of the Latin American and Caribbean region, it will, in the near future, have to be able to increase its levels of physical capital. Considering the facts stated above, several essays were prepared in this thesis in order to (1) assess the impacts of physical capital on the development of the region; and (2) help the regional policy makers in the development of their future investment strategies. It was taken advantage of the data on public and private capital that was recently made available by the International Monetary Fund to achieve these objectives. Initially, the idea was only to use the data on the public capital stock since it is the one that is linked to the government's provision of economic and social infrastructure. However, as the private capital stock data was also available, it was also included in the analysis. Why stocks? Because in this way, instead of just accounting for the annual flows of public and private investment (only capital increases), it accounts for the volume of existing capital, as well as for the effects of depreciation. The first essay was based on the historical analysis of the evolution of both types of capital in the Latin American and Caribbean region from 1970 to 2017, in order to be able to verify if there was, in fact, a lack of investment in physical capital in this region. Using the data from the International Monetary Fund, the progress of investment and stocks in this region during the previously stated period was graphically analysed, accompanying this analysis with, pass the redundancy, the analysis of the economic conjuncture of the region and with comparisons with the evolution of the physical capital in similar regions. The results of this analysis seem to confirm the hypothesis that this region suffers from a lack of investment in physical capital, with the Latin American and the Caribbean being characterised by a relatively low level of public investment (especially when compared to similar regions), by a very volatile private investment and by a very slow evolution (in some periods almost constant) of its public and private capital stocks as a percentage of gross domestic product (GDP). After this more descriptive analysis, the three essays that followed were based on empirical analysis applied to Latin American and Caribbean countries panels, in order to study the effects from both capital stocks on the region's economic growth, on the region's income inequality levels and on the region's energy intensity, respectively. In this way, it was possible to evaluate the contributions that public and private capital stocks had in various development fields, namely in the economic, socioeconomic and sustainable fields. Regarding the methodologies that were used, in the second essay of this thesis, where the relationship between the capital stocks and economic growth was investigated, the panel vector autoregressive (PVAR) methodology was used to study the short-run impacts and Granger's causalities, whereas the panel dynamic ordinary least squares (PDOLS) and panel fully modified ordinary least squares (PFMOLS) estimators were used to study the long-run impacts. In the third essay, where the impacts of both capital stocks on income inequality were analysed, the panel autoregressive distributed lag (PARDL) model and the Driscoll-Kraay (DK) estimator with fixed effects were used to study the short- and long-run impacts of the variables. Finally, in the fourth essay, where the role of public capital stock and private capital stock in the region's energy intensity was studied, the panel autoregressive distributed lag (PARDL) model and the Driscoll-Kraay (DK) estimator with fixed effects were again used to study the short- and long-run impacts of the variables. In addition, the log t regression test method and the club clustering algorithm were also used in order to investigate the various convergence clubs in terms of energy intensity, whereas the ordered-logit model was used to verify whether capital stocks were important determinants for the club's formation. The results from the essays seem to indicate that: 1) both public and private capital had a positive effect on the long-run economic growth of the Latin American and the Caribbean countries; 2) in the short-run, public capital seems to have had negative effects on both growth and private capital (crowd-out effect); 3) the capital stock (public, private and total) seems to have contributed to the increase in income inequality in the short-run; 4) in the long-run, this effect seems to disappear (which still does not demonstrate a contribution of physical capital to the reduction of income inequality); 5) both types of capital (public and private) appear to have had an enhancing effect on the long-run energy intensity of the Latin America and the Caribbean countries; 6) the public and private capital stocks did not prove to be determinant factors for the formation of the clubs. Through these results, it can be concluded that there is, in fact, a lack of investment in physical capital in Latin America and the Caribbean and that, therefore, in order to promote the development of the region, regional governments should increase their investment levels (through better financing methods) and create conditions to attract private investment, at the same time as they develop strategies that allow to public and private capital to act as complements. They should also improve the quality of their investment projects, as well as their selection criteria, channelling a significant part of the new investments to the poorest/underdeveloped areas, creating incentives for private investment also to reach these areas. Finally, they must ensure that the new physical capital is more energy-efficient and should create measures to encourage the private sector to follow this same trend.
- The impact of globalization and economic freedom on economic growth: the case of the Latin America and Caribbean countriesPublication . Santiago, Renato; Fuinhas, José Alberto; Marques, António CardosoThis study examines the impacts of globalization and economic freedom on the economic growth of a group of 24 developing countries from the Latin America and Caribbean over a time span ranging from 1995 to 2015. We have constructed two models, one with the globalization’s overall value and another with the political, social and economic dimensions of globalization. Our results point out to the fact that globalization has had a positive impact on the economic growth of these countries in the long-run, as well their economic and social dimensions. Still, the political dimension of globalization did not show any statistically significant effect upon growth. In addition, we have found evidence of a negative impact resulting from economic freedom on the economic growth of these Latin American and Caribbean countries in the long-run. In the short-run, the results have indicated that electric power consumption (in all estimations) and social globalization (in only one estimation) were able to promote the economic growth of these countries. Finally, the negative and significant coefficient of the error correction mechanism in all estimations points out to the presence of cointegration/long-memory relationships between the variables. This study aims to contribute to the enrichment of the globalization- growth and economic freedom-growth literature in the way that it attempts to overcome some of the flaws identified in previous studies. In our analysis we have identified and corrected the presence of outliers, which are quite often neglected, and if not controlled can actually compromise the macro-economic analysis of this region. The results from this study should primarily contribute to guide policymakers in their decisions, thus helping them to draw growth-promoting policies in their respective countries.