Balance of payments constrained growth model the case of vietnam, 1995 2010

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS Balance of Payments Constrained Growth Model: The Case of Vietnam, 1995-2010 By DOAN TU HAO MASTER OF ARTS IN DEVELOPMENT ECONOMICS Academic supervisor Dr DINH CONG KHAI Ho Chi Minh City, December 2012 Table of Contents CHAPTER I: INTRODUCTION .6 1.1 Problem statement 1.2 Research questions 1.3 Structure of Study .9 CHAPTER II: LITERATURE REVIEW 10 2.1 2.2 Theories 10 Balance of Payments in Supporting and Constraining Growth 11 2.3 Conceptual framework for the study 15 2.4 Empirical studies 19 CHAPTER III: ECONOMIC GROWTH AND BALANCE OF PAYMENT OF VIETNAM 22 3.1 Vietnam Economic Growth Overview 22 3.2 Balance of Payment of Vietnam 24 3.2.1 Current account 24 3.2.2 Capital Account 30 CHAPTER IV: MODEL SPECIFICATION AND FINDING 35 4.1 Model Specification and Data 35 4.2 Regression results and findings 36 4.3 Thirwall’s law in Vietnam 38 CHAPTER V: CONCLUSION AND RECOMENDATION 41 4.1 Conclusion 41 4.2 Recommendation 42 4.3 Limitation .44 APPENDIXES 45 References 54 List of Tables Table 1: Unit root test for stationary 36 Table 2: Estimation results 37 Table 3: Actual Growth Rate and Estimated BOP Constrained Growth Rates 38 Table 4: Correlation coefficients of Actual Growth Rate and Estimated Growth Rates .39 List of Figures Figure 1: GDP growth 1990-2010 Figure 2: Current account balance (% of GDP) 25 Figure 3: Trade balance and current account balance 26 Figure 4: Ratio of trade and gross domestic products, 1900-2010 (Trade/GDP) 27 Figure 5: Imports, Exports and Trade balance, 1990-2010 27 Figure 6: Net Transfers from abroad, 1990-2010 28 Figure 7: Net Income from abroad, 1990-2010 29 Figure 8: Foreign direct investment, 1990-2010 31 Figure 9: Total debt as percent of export and GDP (%) .33 Figure 10: Debt service ratio 34 List of Appendixes Appendix 1: OLS Regression result .45 Appendix 2: Unit root tests for stationary 45 Appendix 3: Granger Test for Causality 48 Appendix 4: LM-test for serial correlation 48 Appendix 5: Test for Normality with Jarque-Bera test 49 Appendix 6: White's test for Heteroscedasticity 50 Appendix 7: Ramsey RESET Test .50 Appendix 8: CUSUM test for stability of the estimated parameters 51 Appendix 9: The estimated growth rate in the basic model 52 Appendix 10: The estimated growth rate in the extended model 52 Appendix 11: The estimated growth rate in the extended model with remittance .53 Appendix 12: The estimated growth rate in the extended model with debt 53 CHAPTER I: INTRODUCTION 1.1 Problem statement There are many debates about the sources of economic growth from supply side and demand side On the supply side, economic growth can be explained by the consolidation of factors such as inputs, productivities, research and technology Krugman (1989) believes that each country has its own growth rate because of different growth of total factor productivity Solow (1957) states that total factor productivity in the Solow residual brings growth rate in the long term On the demand-led growth, Keynesian (1936) considers effects of factors in aggregate demand on growth through multipliers Thirlwall (1979), a post-Keynesian economist, considers demand, especially international trade, as a principal cause of accelerating or constraining growth in the long run, in other words, growth rate in open economies can be constrained by external demand The author also suggests that the dominant constraint upon demand is balance of payments in an open economy and his model is so called balance of payments constrained economic growth model (BPCG) However, his first generation of BPCG model has many limitations in explaining growth performance in developing countries As a result, the extended model was later developed by Thirlwall and Hussain (1982), which is also known as the second generation of BPCG model, considering the impacts of foreign capital flows The Balance of Payment constrained growth model with basic concepts that actual economic growth rate cannot be higher than the estimated rates used by BOP model except for having capability to finance the deficit Current account would be in deficit if import is larger than export, and thus sources of finance must be sought to meet the need of shortfall by either from borrowing abroad, and/or from net transfer, DFI, i.e via growing of capital inflows Total income or aggregate demand mentioned above is defined as a function of consumption, investments, government expenditure, and exports In contrast to the case that all other components of aggregate demand depend on the country total income, export depends on the world total income Assuming that there is no export and no capital inflow, aggregate demand would be repressed certain elements of aggregate demand because of insufficient foreign currency For example, if there is no foreign currency to support for importing modern machinery and equipment which are used for domestic production, it would lead to several issues such as increase in unemployment, or resources underutilization More easily, if we still have export but rate of growth of imports is higher than exports, capital inflow can initially abate aggregate demand repression in the short term However, trade deficits, in reality, cannot be financed endlessly by capital inflow and this would lead to aggregate demand will be constrained by BOP Balance of payment constraint can affect aggregate demand in the short term or long term; or this will slow down economic growth In other words, economic growth has to be run in balance of payments constraint Beside that we cannot deny the role of factors supply and technological progress in economic growth but it is very precious to bear in mind that "in most countries demand constraints tend to bite long before supply constraints are ever reached" (Thirlwall, 2002) Considering the period from 1990 to 2010, Vietnam achieved very high annual economic growth rates, except three years 1998 (5.8%), 1999 (4.8%) after Asian financial crisis and 2009 (5.32%) after global financial crisis This is considered as one of achievements of appropriate “open door” policies by relaxing exchange rate controls, internal and external trade impediments As a result, export growth and import growth increase, except for 1996 and few years later when government decided to establish restrictions on import due to alarming current account deficit(1996:-11.5% of GDP) Although export growth rate is sometimes higher than import growth rate, but it is still smaller than import growth in absolute values in most of the years in the period of 1990-2010, trade deficit therefore still exists Furthermore, trade deficit is a chronic issue in Vietnam because of imports-exports structure, as less of competiveness in exporting sector as it mainly comprises of low value-added goods, raw materials and intermediate products Current account is in deficit as a consequence of deficit in trade balance Figure 1: GDP growth 1990-2010 12.00 10.00 8.00 6.00 4.00 2.00 0.00 1990 1991 Source: World Bank However, current account deficit does not always affect the balance of payments accordingly because this may be compensated by capital account surplus Obstinate current account deficit following by capital account surplus, for example, borrow from aboard, FDI, is not sustainable in the long run because one country cannot infinitely borrow abroad to finance current account deficit Financing the deficit by FDI can help the BOP balance and keep the economic growth in the short term, but in the long term this also makes unsustainable growth as it relies on the external sources The fluctuation in FDI flow would lead to negative impacts on domestic economy such as uncontrollable production, unemployment rate and therefore economic growth Balance of payments problems may happen not only with developing countries but also with developed countries However, it is often referred to the developing world The aim of this paper is to re-apply the Thirwall’s law of balance of a payments constraint on economic growth on the Vietnam economy with the new scenario recently by comparing it with potential growth rate by using time series data extending over two decades with the period 1990-2010 1.2 Research questions This study is to examine Whether balance of payments in Vietnam constrained economic growth or not? Which factors behind balance of payments restrict economic growth? What policy implications are for the balance of payments constrained economic growth in Vietnam? 1.3 Structure of Study The thesis includes chapters starting with the introduction in Chapter 1.Chapter subsequently provides literature review for thesis Next, Chapter provides the overview economic growth and balance of payments of Vietnamese scenario Chapter shows the model specifications and the findings Chapter eventually shows the conclusion and further recommendation CHAPTER II: LITERATURE REVIEW 2.1 Theories The balance of payments constrained growth model, which was developed by Thirlwall’s (1979), identifies the long run the economic growth rate of open economy constrained by trade balance By Thrilwall, the growth rate equilibrium can be defined by the ratio of export growth rate and the income elasticity of demand for imports This model has been tested not only with a large sample of developing and developed countries around the world but also tested by many different techniques and methods With the first generation of BPCG, the author ignored international capital flows and interest payments However, capital flows and interest payments are an important part of the BOP As a result, Thirlwall and Hussain (1982) developed the extended model from the original model to allow trade deficits and capital inflow This model shows that in an open economy the growth rate may be constrained by capital inflows together with trade factors which mean that capital inflows tighten or loosen the balance of payment constrained growth To improve the capital inflows limitation, BPCG model was redefined by Moreno-Brid (1998, 1999) with the assumption that accumulating foreign debt has sufficient condition It combines interest payments from imports of goods with non-factor services in the analysis of debt accumulation In his research, McCombie (1997), the author tested with time series data for many nations in the short run He found that balance of payments equilibrium may delay the consistent growth rate with the exports and imports growth rate For example, if growth rates are higher than the consistent level with the external account equilibrium then the capital inflows will fulfill Besides, there are problems with FDI, debt and financial investment portfolio As analyzed in previous chapter, FDI has negative effects on both current account and capital account, especially on trade balance since it may contain risks and can also easily get inflicted from adverse shocks in economic and political environments in Vietnam together with region, caused by expectation of foreign investors Other short term capital inflows such as portfolio investment and other types of international financial flows are more exposed to volatility in economy or political change than FDI therefore the risks are also considered higher Vietnam cannot have large capital inflows and trade deficit forever in order to achieve high economic growth Thus this creates a need some policy applications under balance of payments constraint to solve this problem 4.2 Recommendation In order to achieve high growth rate, Vietnam needs to reduce the balance of payments constraint therefore I propose a focus on trade balance that includes exports and imports, FDI and external debt which contribute to main parts in BOP of Vietnam First, I suggest a policy to promote exports by encouraging diversification of exports markets such as approaching and targeting new markets instead of traditional markets, and subsidize new export products as well to mitigate market risks Additionally, the government can play an important role to solve the new market failure problem (Stiglitz, 2002) by putting more efforts to reduce the asymmetric information problems in such a way of providing investors with more comprehensively and timely information regarding market conditions The structure of exports should target to improving productivity, moving domestic production structure to high value added products, terminating protection for inefficient industries and state owned enterprises Besides, the government can support domestic entrepreneurs by building good infrastructures in order to reduce the costs and time of production, helping production firms enter and exit market more easily Second, I propose that government should support for production firms to produce intermediate goods domestically because Vietnam imports virtually capital and intermediate goods for production and exports On the other hand, if it fears large deficits in trade deficit and current account and restrict imports, this will hamper economic growth This measure is temporary one only In long-term, the government needs to encourage diversification in market and structure of exports to obtain foreign exchange for imports Moreover, the government should give suitable routes to open domestic market to pressurize protected industries into strengthening capacity of competitiveness Third, it is noticeable as analyzed above that capital flows in Vietnam are not only equity but also debt which raise the cost of financing the current account deficit In order to fill the gap of trade deficit and current account deficit, the government should attract inflow of FDI by focusing more on creating a transparent legal framework and create a good market environment for all foreign investors, aiming to reduce inefficient enterprises and increasing efficient enterprises to provide better allocation of resources The government should prioritize FDI producers which can manufacture intermediate goods for the production inputs By doing so, the country can reduce the imports which leads to decrease in trade deficit Furthermore, the government should encourage FDI producers to invest in high tech industries, which can improve the value added feature of domestic production goods including export goods It is also noteworthy to mention that a better legal framework also means an improved investment laws to meet the international standards, which is vital since Vietnam is effectively a member of WTO, creating fairer treatments between domestic and foreign investors and reducing corruption opportunities Last but not least is the issue of external debt which includes risk and cost Although most of debts are concessionary, long maturity, no bunching for repayments (IMF, 2009), there is a steady increase in non-concessionary loans and the government should evaluate and consider the allocation of capital inflow to the most efficient projects and programs to make use of better financing 4.3 Limitation Just like any regular research project, although I have aimed at my best to address and mitigate the arisen issues, there are some aspects that could be improved such as in the data collecting stage The data is gathered from several sources and in some case it could mean lack of reliability It is notable that due yearly data is not enough for the length required for running regression even though it is better when using yearly data for this thesis Secondly, policy implications cannot be conducted with more details because of the limitations of model use It is recommended that government should make structure of export more diversify Within the areas discussed in this thesis, the question of how to change the structure still remains open Hopefully in the future, yearly data can be obtained and detailed of how to change would be addressed in more appropriate depth and details APPENDIXES Appendix 1: OLS Regression result Dependent Variable: LOG(IMPORT) Method: Least Squares Date: 09/05/12 Time: 14:56 Sample: 1995Q2 2010Q4 Included observations: 63 Variable Coefficient Std Error t-Statistic Prob LOG(GDP) PRICE C 2.185929 0.044234 -2.478954 0.096994 0.016296 1.101837 22.53676 2.714439 -2.249838 0.0007 0.0087 0.0281 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.894753 0.891245 0.259726 4.047458 -2.924187 255.0450 0.000000 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat 22.38571 0.787574 0.188069 0.290123 0.228208 2.487923 Appendix 2: Unit root tests for stationary Test with M series (Import) Null Hypothesis: D(IMPORT) has a unit root Exogenous: Constant, Linear Trend Lag Length: (Automatic based on SIC, MAXLAG=10) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level *MacKinnon (1996) one-sided p-values Augmented Dickey-Fuller Test Equation Dependent Variable: D(IMPORT,2) Method: Least Squares Date: 10/16/12 Time: 15:41 Sample (adjusted): 1997Q1 2010Q4 Included observations: 56 after adjustments t-Statistic Prob.* -5.688887 -4.130526 -3.492149 -3.174802 0.0001 Variable Coefficient Std Error t-Statistic Prob D(IMPORT(-1)) D(IMPORT(-1),2) D(IMPORT(-2),2) D(IMPORT(-3),2) D(IMPORT(-4),2) D(IMPORT(-5),2) C @TREND(1995Q2) -2.359573 1.333195 0.996153 1.035517 0.611413 0.709146 -1.75E+08 24201747 0.414769 0.378929 0.326934 0.269861 0.195309 0.135725 2.63E+08 7578022 -5.688887 3.518328 3.046953 3.837223 3.130496 5.224874 -0.663660 3.193676 0.0000 0.0010 0.0038 0.0004 0.0030 0.0000 0.5101 0.0025 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.734143 0.695372 8.33E+08 3.33E+19 -1225.386 18.93545 0.000000 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat 24339286 1.51E+09 44.04949 44.33883 44.16167 2.112991 Test with Y series (GDP) Null Hypothesis: D(GDP,2) has a unit root Exogenous: Constant, Linear Trend Lag Length: (Automatic based on SIC, MAXLAG=10) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -11.84121 -4.127338 -3.490662 -3.173943 0.0000 *MacKinnon (1996) one-sided p-values Augmented Dickey-Fuller Test Equation Dependent Variable: D(GDP,3) Method: Least Squares Date: 10/16/12 Time: 15:39 Sample (adjusted): 1996Q4 2010Q4 Included observations: 57 after adjustments Variable Coefficient Std Error t-Statistic Prob D(GDP(-1),2) D(GDP(-1),3) D(GDP(-2),3) D(GDP(-3),3) C @TREND(1995Q2) -6.061508 3.587377 2.074494 0.507414 49.04279 2.960911 0.511900 0.389953 0.264778 0.133883 885.9963 23.48776 -11.84121 9.199522 7.834840 3.789970 0.055353 0.126062 0.0000 0.0000 0.0000 0.0004 0.9561 0.9002 R-squared Adjusted R-squared S.E of regression 0.998796 0.998678 2910.990 Mean dependent var S.D dependent var Akaike info criterion 732.7701 80048.07 18.88967 Sum squared resid Log likelihood F-statistic Prob(F-statistic) 4.32E+08 -532.3557 8458.921 0.000000 Schwarz criterion Hannan-Quinn criter Durbin-Watson stat 19.10473 18.97325 2.132032 Test with p series (relative Price) Null Hypothesis: PRICE has a unit root Exogenous: Constant, Linear Trend Lag Length: (Automatic based on SIC, MAXLAG=10) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -3.812947 -4.124265 -3.489228 -3.173114 0.0228 *MacKinnon (1996) one-sided p-values Augmented Dickey-Fuller Test Equation Dependent Variable: D(PRICE) Method: Least Squares Date: 10/16/12 Time: 15:43 Sample (adjusted): 1996Q3 2010Q4 Included observations: 58 after adjustments Variable Coefficient Std Error t-Statistic Prob PRICE(-1) D(PRICE(-1)) D(PRICE(-2)) D(PRICE(-3)) D(PRICE(-4)) C @TREND(1995Q2) -0.719912 0.283438 0.139611 0.000267 0.521847 1.785576 0.001644 0.188807 0.198048 0.170586 0.151777 0.131280 0.652967 0.013263 -3.812947 1.431155 0.818424 0.001758 3.975075 2.734559 0.123944 0.0004 0.1585 0.4169 0.9986 0.0002 0.0086 0.9018 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.553130 0.500557 1.669372 142.1270 -108.2905 10.52120 0.000000 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat -0.012550 2.362166 3.975534 4.224208 4.072398 2.000818 Appendix 3: Granger Test for Causality In order to test the causality between variables in regression I use Granger test and the result show that all the variables not Granger Cause each other Pairwise Granger Causality Tests Date: 10/16/12 Time: 16:52 Sample: 1995Q2 2010Q4 Lags: Null Hypothesis: Obs F-Statistic Prob IMPORT does not Granger Cause GDP GDP does not Granger Cause IMPORT 61 20.0072 3.32413 3.E-07 0.0432 PRICE does not Granger Cause GDP GDP does not Granger Cause PRICE 61 6.51491 11.2962 0.0029 8.E-05 PRICE does not Granger Cause IMPORT IMPORT does not Granger Cause PRICE 61 1.82621 0.14612 0.1705 0.8644 Appendix 4: LM-test for serial correlation Breusch (1978) and Godfrey (1978) have developed an autocorrelation test The Breusch–Godfrey serial correlation LM test is a test for autocorrelation in the errors in a regression model It makes use of the residuals from the model being considered in a regression analysis, and a test statistic is derived from these The null hypothesis is that there is no serial correlation versus alternative hypothesis of autocorrelation; the null hypothesis cannot be rejected at percent level Breusch-Godfrey Serial Correlation LM Test: F-statistic Obs*R-squared 12.47119 18.94532 Prob F(2,58) Prob Chi-Square(2) Test Equation: Dependent Variable: RESID Method: Least Squares Date: 10/16/12 Time: 16:00 Sample: 1995Q2 2010Q4 Included observations: 63 Presample missing value lagged residuals set to zero 0.0000 0.0001 Variable Coefficient Std Error t-Statistic Prob LOG(GDP) PRICE C RESID(-1) RESID(-2) 0.018941 -0.012776 -0.181311 -0.192565 0.480628 0.109217 0.016654 1.223886 0.169296 0.123903 0.173429 -0.767148 -0.148144 -1.137446 3.879056 0.8629 0.4461 0.8827 0.2600 0.0003 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.300719 0.252493 0.220904 2.830309 8.343460 6.235594 0.000304 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat 2.87E-15 0.255503 -0.106142 0.063948 -0.039244 1.707135 Appendix 5: Test for Normality with Jarque-Bera test A standard normality test is the Jarque-Bera (JB) test The null hypothesis is the residual is normality distributed We are using the JB test to test the null hypothesis for normality cannot be rejected at percent or percent levels Appendix 6: White's test for Heteroscedasticity Heteroskedasticity Test: White F-statistic Obs*R-squared Scaled explained SS 3.209447 13.84003 8.669172 Prob F(5,57) Prob Chi-Square(5) Prob Chi-Square(5) 0.0127 0.0167 0.1230 Test Equation: Dependent Variable: RESID^2 Method: Least Squares Date: 10/16/12 Time: 16:06 Sample: 1995Q2 2010Q4 Included observations: 63 Variable Coefficient Std Error t-Statistic Prob C LOG(GDP) (LOG(GDP))^2 (LOG(GDP))*PRICE PRICE PRICE^2 -12.74985 2.316132 -0.104878 0.029601 -0.309163 -0.001750 10.51612 1.847747 0.081133 0.014161 0.158555 0.001702 -1.212410 1.253490 -1.292669 2.090369 -1.949880 -1.027885 0.2304 0.2151 0.2013 0.0411 0.0561 0.3083 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.219683 0.151234 0.070119 0.280249 81.18601 3.209447 0.012728 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat 0.064245 0.076110 -2.386857 -2.182749 -2.306581 1.817671 Appendix 7: Ramsey RESET Test Ramsey RESET Test: F-statistic Log likelihood ratio 2.017660 4.237437 Prob F(2,58) Prob Chi-Square(2) 0.1422 0.1202 Test Equation: Dependent Variable: LOG(IMPORT) Method: Least Squares Date: 10/16/12 Time: 16:14 Sample: 1995Q2 2010Q4 Included observations: 63 Variable Coefficient Std Error t-Statistic Prob LOG(GDP) PRICE C FITTED^2 -395.3561 -8.000072 1796.337 8.172474 266.5654 5.392711 1215.492 5.424942 -1.483149 -1.483497 1.477868 1.506463 0.1434 0.1434 0.1449 0.1374 FITTED^3 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) -0.122321 0.901600 0.894813 0.255430 3.784176 -0.805468 132.8572 0.000000 0.080400 -1.521408 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat 0.1336 22.38571 0.787574 0.184301 0.354391 0.251198 2.544096 Appendix 8: CUSUM test for stability of the estimated parameters We check the parameter stability of the model by using CUSUM test, which is based on cumulative sums of scaled recursive residuals and plotting by time to descriptive the CUSUM statistic The expectation of CUSUM statistics are zero under the null hypothesis of constant parameters With percent significance confidence bound, the graph of CUSUM statistics plotted around zero within its confidence bounds the null hypothesis of parameter constancy is not rejected therefore the CUSUM test the null hypothesis cannot be rejected at 5% level Appendix 9: The estimated growth rate in the basic model Year x 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20.00 21.42 16.00 12.45 12.17 21.10 16.18 14.37 15.95 18.62 17.78 16.07 11.29 8.05 10.08 14.65 Pd x-Pd Ybasic 5.9 3.5 0.4 -3.4 -1.1 4.4 -6.8 0.7 9.3 12 13.9 7.3 7.2 24.8 -11.9 10.7 14.10 17.92 15.60 15.85 13.27 16.70 22.98 13.67 6.65 6.62 3.88 8.77 4.09 -16.75 21.98 3.95 6.47 8.22 7.16 7.27 6.09 7.66 10.54 6.27 3.05 3.04 1.78 4.02 1.88 -7.68 10.08 1.81 Appendix 10: The estimated growth rate in the extended model Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 x 20.00 21.42 16.00 12.45 12.17 21.10 16.18 14.37 15.95 18.62 17.78 16.07 11.29 8.05 10.08 14.65 θ 0.9448 0.9436 0.9467 0.8989 0.9172 0.9134 0.9195 0.9392 0.9236 0.9279 0.9406 0.9426 0.9412 0.9436 0.9368 0.9429 1-θ 0.055 0.056 0.053 0.101 0.083 0.087 0.081 0.061 0.076 0.072 0.059 0.057 0.059 0.056 0.063 0.057 Pd 5.9 3.5 0.4 -3.4 -1.1 4.4 -6.8 0.7 9.3 12 13.9 7.3 7.2 24.8 -11.9 10.7 f 38.65 26.6 19.63 9.3 8.96 17.1 13.15 17.9 27.23 27.97 3.4 12.9 46.47 6.5 65.4 -13.7 f-Pd 32.75 23.1 19.23 12.7 10.06 12.7 19.95 17.2 17.93 15.97 -10.5 5.6 39.27 -18.3 77.3 -24.4 Yext 9.50 9.87 7.42 5.72 5.50 6.41 7.56 6.67 7.39 8.45 7.38 7.10 7.15 5.56 6.57 5.70 Appendix 11: The estimated growth rate in the extended model with remittance Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 x 20.00 21.42 16.00 12.45 12.17 21.10 16.18 14.37 15.95 18.62 17.78 16.07 11.29 8.05 10.08 14.65 Pd 5.9 3.5 0.4 -3.4 -1.1 4.4 -6.8 0.7 9.3 12 13.9 7.3 7.2 24.8 -11.9 10.7 r-Pd 172.92 118.02 -32.78 37.20 11.63 23.22 -11.11 60.21 9.34 27.00 22.46 13.33 55.43 -14.69 0.36 26.51 r 178.82 121.52 -32.38 33.8 10.53 27.62 -17.91 60.91 18.64 39.00 36.36 20.63 62.63 10.11 -11.54 37.21 ω 1-ω 0.94 0.9 0.94 0.93 0.93 0.928 0.942 0.918 0.918 0.928 0.921 0.922 0.898 0.913 0.917 0.909 0.060 0.100 0.060 0.070 0.070 0.072 0.058 0.082 0.082 0.072 0.079 0.078 0.102 0.087 0.083 0.091 Yremit 13.38 14.26 6.00 6.51 5.57 9.75 6.70 8.31 7.07 8.82 8.32 7.27 7.24 2.78 4.25 7.22 Appendix 12: The estimated growth rate in the extended model with debt Year x θ 1-θ Pd f f-Pd p d d-Pd 1-p Ydebt 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20.00 21.42 16.00 12.45 12.17 21.10 16.18 14.37 15.95 18.62 17.78 16.07 11.29 8.05 10.08 14.65 0.9448 0.9436 0.9467 0.8989 0.9172 0.9134 0.9195 0.9392 0.9236 0.9279 0.9406 0.9426 0.9412 0.9436 0.9368 0.9429 0.055 0.056 0.053 0.101 0.083 0.087 0.081 0.061 0.076 0.072 0.059 0.057 0.059 0.056 0.063 0.057 5.9 3.5 0.4 -3.4 -1.1 4.4 -6.8 0.7 9.3 12 13.9 7.3 7.2 24.8 -11.9 10.7 38.65 26.6 19.63 9.3 8.96 17.1 13.15 17.9 27.23 27.97 3.4 12.9 46.47 -6.5 65.4 -13.7 32.75 23.1 19.23 12.7 10.06 12.7 19.95 17.2 17.93 15.97 -10.5 5.6 39.27 -31.3 77.3 -24.4 0.960 0.970 0.938 0.928 0.915 0.932 0.938 0.947 0.969 0.976 0.976 0.980 0.981 0.985 0.984 0.986 18.89 8.80 130.85 19.89 28.91 -7.29 -6.91 -0.51 -30.20 -3.94 18.96 -0.62 29.53 6.10 -7.89 12.76 12.99 5.30 130.45 23.29 30.01 -11.69 -0.11 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