Essays on Macroeconomic Policies in Developing Countries

Abstract

This thesis consists of three explorations on macroeconomic policies in developing countries. <br /> The first essay evaluates the desirability of public capital investment, taking China as the study subject. Based on an endogenous growth model, we derive a simple benchmark criterion, linking capital marginal product, investment efficiency and depreciation rate together, for policy evaluation. Empirically, we find that generally there is still an underinvestment of infrastructure in Chinese provinces.<br /> The second paper investigates the impact of international financial liberalization on the public debt across a set of developing countries. This paper provides both empirical evidence and theoretical explanation that, international financial liberalization was linked to the decrease of external public debt in developing countries since the 1990s.<br /> The third research attempts to understand whether domestic financial development affects the aggregate output volatility. This paper argues that financial development can either exacerbate or dampen output volatility, depending on the type of industry whose credit access is expanded.