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Effectiveness of Globalization: A Case Study of Fiji
Rukmani Gounder*
ABSTRACT
This paper examines the effectiveness of globalization in the case of
Fiji. The paper employs simulation methodology and the dynamic
multiplier analysis, using a two-sector model, to evaluate the effects
of capital flows on economic growth. First, the short run (impact
multiplier) and the long run multipliers are calculated for seven
endogenous variables with respect to nine exogenous variables. Second,
the counterfactual simulation analysis tests how the interactions under
alternative assumptions between foreign direct investment (FDI) and aid
flows determine the effectiveness of globalization. The results show
that aid increases government investment while FDI increases private
investment. Also FDI has a larger impact on savings and imports;
however exports do not change with either of the exogenous variables.
Overall, under the alternative assumptions, as military coups caused
political and economic instability economic growth does not differ from
‘no policy change’ from an increase in FDI or foreign aid flow.
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* The author is
Associate Professor, Department of Applied and International Economics,
Massey University, Palmerston North, New Zealand. This work was
completed while the author was a Visiting Fellow at the National Center
for Development Studies, The Australian National University, Canberra,
Australia. I am grateful to Dr Liz Petersen for her suggestions and
Vilaphonh Xayavong for research assistance. The usual caveat applies.
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Gounder. 2003. Sri Lankan Journal of
Agricultural Economics. Volume 5 (1). Pp. 47 - 68
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