Credit-Market Imperfection and Monetary Policy Within DSGE Models

This survey presented the various ways that are utilized in the literature to include financial market frictions in dynamic stochastic general equilibrium (DSGE) models. It focuses on the fundamental issue: to what extent the Taylor rules are optimal when the central bank introduces the goal of financial stability. Indeed, the latest financial crisis shows that the vulnerability of the credit cycle is considered the main source for the amplification of a small transitory shock. This conclusion changed the instrument that drives the transmission of monetary policy through the economy and pushed the policymakers to include financial stability as a second objective of the central bank.

Growth effect of income inequality in sub-Saharan Africa: exploring the transmission channels

Sub-Saharan Africa (SSA) ranks as the second most unequal region globally (in terms of income distribution), harboring 10 of the 19 most unequal countries in the world. This paper explores the channels through which income inequality exerts its effects on economic growth in SSA. The study spans the period 1995–2015, focusing on 31 SSA countries. Findings from the two-step system generalized method of moments suggest that income inequality exerts a significant positive effect on economic growth via the saving transmission channel, while it has a statistically significant negative effect on economic growth in the region through the channels of fertility, credit market imperfection, and fiscal policy.

Economic Recession, Informal Sector and Skilled–Unskilled Wage Disparity in a Developing Economy: A Trade-Theoretical Analysis

The paper analyses some selective aspects of economic crises, namely skilled-sector recession, reversed international migration of labour and decline in foreign capital inflow on the informal sector employment and wage rate in developing economies and seeks to explain the non-monotonic effect on the informal sector both across nations and within nation across sectors. In so doing, we develop three-sector General Equilibrium models under two different scenarios which may apply to a large class of emerging market economies. In the first model, we have a traded informal export sector, and the role of the non-traded informal sector in the presence of credit market imperfection is analysed in the second model. Skilled-sector recession produces a favourable (unfavourable) effect on the workers employed in the traded informal sector (non-traded informal sector) due to an induced complementary relationship between the high-skilled export sector and the informal sector. A fall in emigration level of skilled or unskilled worker and a decline in foreign capital inflow hurt the workers in the informal traded sector, while the workers in the non-traded informal sector gain. The results of the paper reflect contradictions of an emerging economy, which is essentially hybrid economics in which capitalist nucleus has a conditional-conditioning relationship with an archaic structure. JEL Codes: F13, J31